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 proctection insurance.
Consumer credit insurance is not compulsory, so before you
sign up work out if it offers you real value for money.
What is consumer credit
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.
You may already have consumer credit insurance. To check,
contact your lender and ask for a copy of the contract.
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 can also be offered
CCI may also provide other types of cover, including for
situations such as when your credit card is stolen or when goods
you have bought using your credit card, or under another loan, are
damaged, lost or stolen.
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 ask before taking out
consumer credit insurance
Here are some questions to ask your credit provider or lender
before buying consumer credit insurance:
- 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 under the policy 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 significant
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.
Things to consider before
taking out consumer credit insurance
You may already have another type of insurance that could cover
your repayments. For example, if you have life insurance or income
protection insurance through your super fund you may not need
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
Cooling off period
If you've signed up for consumer credit insurance you can cancel
the policy within the cooling off period and the premiums you have
already paid will be refunded.
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, it may mean there is 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 call the
insurer to ask them questions about whether you can claim for
something under your policy.
What to do if you are experiencing financial difficulty
Under the General Insurance Code of Practice, if you're in
urgent financial need of payment you can speak to your insurer and
ask them to fast track the assessement and decision making for your
claim. You can also ask for an advance payment within five business
days of you demonstrating your eligiability.
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 informatin
about applying for hardship.
Providing evidence for a consumer credit insurance claim
If you are having 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.
How to complain about
consumer credit insurance
If your insurer rejects your claim or if you wish to make a
complaint, you should first contact your insurer's internal dispute
If your insurer maintains its rejection of your claim, your
complaint remains unresolved for 45 days or it is not resolved to
your satisfaction, you can lodge a dispute with the Financial Ombudsman Service
online or by calling 1800 367 287.
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: 07 Jul 2017