Consumer credit insurance
Think twice before you buy consumer credit
You may be offered consumer credit insurance when you sign up
for a loan or credit card. Consumer credit insurance is also known
as CCI or credit, loan or mortgage protection insurance.
Consumer credit insurance offers poor value and is not
compulsory. Before you sign up, work out if it offers you any
value for money.
What is consumer credit
You may already have CCI. To check, contact your lender and ask
for a copy of the contract.
Consumer credit insurance provides some cover if you can't meet
the repayments on your credit contract or loan because you lose
your job, you are sick or injured, or you die.
Consumer credit insurance is usually offered as part of a
mortgage, credit card or personal loan at the time the loan or
credit card contract is being approved, but it can also be offered
CCI may also provide cover if your credit card is stolen or if
goods you buy using your credit card (or under another loan), are
damaged, lost or stolen.
Consumer credit insurance is a poor value product
review by ASIC shows that when consumers made a claim:
- for CCI sold with credit cards, only 11 cents was paid for
every $1 paid in premiums
- across all CCI products, only 19 cents was paid for every $1
paid in premiums.
How does consumer credit insurance
Before taking out consumer credit insurance, there are a number
of things to be aware of:
- If your claim is approved, the money is not paid to
you - Any approved claims are paid directly to your credit
or finance provider.
- Payments are either a lump sum or paid in
instalments - Death benefits or total and permanent
disability payments are usually paid in a lump sum. Payments made
in instalments often stop after a set period of time - you will
have to make your own repayments after that.
- CCI does not cover all outstanding debt - For
example, policies that are sold with a credit card usually only pay
out a percentage of the outstanding debt.
- Payout amount could be less than you think
- Your payout is calculated according to
the amount you owe at the time of the insured event not when you
lodge the claim or when it's approved by the
insurer. This means any extra items put on
your credit card after the insured event (for example when you have
an accident or lose your job), will not be covered by the consumer
credit insurance policy.
What to consider before taking
out consumer credit insurance
Before buying consumer credit insurance, ask your credit
provider or lender:
- How much will the policy cost? Some lenders
and credit providers will only tell you the cost per month. Ask
what the full cost of the policy will be.
- How much is the benefit under the policy?
Consider whether the benefit matches the size of the debt. If the
benefit is higher than the debt, you may be paying premiums for
something you do not need.
- Will the insurance premium be added to my
loan? If the answer if yes, the interest you'll have to
pay on the insurance premiums may add significantly to the cost of
- What can I claim for? There may be limits to
what is covered by consumer credit insurance. For example, most
policies will only cover you for involuntary unemployment (when you
are fired or otherwise lose your job) and not when you decide to
resign from your job.
- Are there limits on the amount and/or the duration of
the claimable benefit? In some instances you may only be
paid a percentage of the outstanding balance and payments by
instalment may stop after a fixed period.
- What are the policy exclusions? There are
situations where you may not be able to use the policy if you have
a pre-existing medical condition, are above a certain age or are
- Are there any conditions on making a claim?
There may be cases where you are required to work a set number of
hours in order to meet the definition of 'employed'. There may also
be waiting periods that apply before you can make a claim.
Compare how long it takes different insurers to pay a CCI
claim and the percentage of claims they pay out.
insurance claims comparison tool
Do you need
You may already have another type of insurance that could cover
your repayments. For example, if you have life insurance or income
protection insurance, you may not need CCI.
You should also consider if there's another type of insurance
that meets your needs. Take a look at our section on different kinds of
If you sign up for CCI, you can cancel the policy within the
cooling-off period and the premiums you have already paid will be
You can also cancel your policy after the cooling-off period.
You may still be entitled to a refund of your premiums depending on
the policy and your reasons for cancelling.
How to claim on consumer credit
It's important to lodge a claim as soon as possible after the
insured event. If you wait, there may be a gap between what your
policy pays and the debt you owe. If so, you will be responsible
for paying this gap.
To lodge a claim, contact the insurer - not the lender or the
company that sold you the policy. Don't be afraid to ask the
insurer about whether you can claim for something under your
What to do if you're experiencing financial difficulty
Under the General Insurance Code of Practice, if you
urgently need payment you can ask your insurer to fast track their
assessment of your claim. You can also ask for an advance payment
within five business days of you demonstrating your
If you are in financial hardship, you should also contact your
lender about entering into a hardship arrangement and ask them to
postpone recovery action while your consumer credit insurance claim
is being processed.
See trouble with debt for more
information about applying for hardship.
Providing evidence for a CCI claim
If you have difficulty getting the evidence you need to make a
claim, don't be afraid to speak to your insurer.
If you are asked to regularly complete progress claim forms and
you believe that your condition is permanent, then you should make
arrangements to provide your insurer with medical documents to make
your insurer aware of this.
Complaints about consumer
If your insurer rejects your claim or if you want to make a
complaint, you should first contact your insurer's internal dispute
If, after contacting the internal dispute resolution department,
your insurer still rejects your claim, doesn't resolve your
complaint within 45 days, or fails to resolve it to your
satisfaction, you can lodge a dispute with the Australian
Financial Complaints Authority (AFCA) online or by
calling 1800 931 678.
For more information and sample complaint letters about
financial services, see how to complain.
Consumer credit insurance may sound like a good
idea, but make sure you understand what you are agreeing to and
that it is the best option for you.
Last updated: 11 Jul 2019