Consumer credit insurance
Think twice before you buy consumer credit
When you sign up for a loan or credit you may be offered
consumer credit insurance. This is also sometimes called CCI or
credit, loan or mortgage protection insurance.
Consumer credit insurance is not compulsory. If you are
interested in buying it, work out if it offers you real value for
What is consumer credit
You may already have consumer credit insurance but not know it.
To check, contact your lender and ask for a copy of the
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
Consumer credit insurance is usually offered as part of a
mortgage, credit card or personal loan at the time the loan or
credit contract is being approved, but can also be offered later.
It may also include other types of cover including for situations
when your credit card is stolen or when goods you have bought using
your credit card or under another loan are damaged, lost or
Some things you should know about
consumer credit insurance
- If your claim is approved, the money is not paid to you - it's
paid directly to your credit or finance provider.
- Some payments are made as lump sums (usually death benefits or
total and permanent disability payments). Others are paid in
regular instalments. Payments made in instalments often stop after
a set period of time - you will have to make your own repayments
- Many policies don't cover you for the full amount of your
outstanding debt. For example, consumer credit insurance policies
sold with credit cards usually only pay out a percentage of the
- The payout amount is calculated according to the amount you owe
at the time of the insured event (for example when you have an
accident or lose your job) - not when you lodge the claim or when
the claim is approved by the insurer. So for example any extra
items you put on your credit card after the insured event occurs
will not be covered by the consumer credit insurance policy.
What to ask before taking out
consumer credit insurance
Questions for your credit provider or lender
||Things to look out for
How much will the policy cost you?
Some lenders and credit providers will only tell you the cost per
month. Ask what the full cost of the policy will
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 your loan?
If so, the interest you will have to pay on the insurance premiums
may add significantly to the cost of the product.
What would you be able to claim for?
There may be significant limits to what is covered. For example,
most consumer credit insurance policies 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 duration of the claimable
You may only be paid a percentage of the outstanding balance and
payments by instalment may stop after a fixed
What are the policy exclusions?
For example, 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 conditions that you must satisfy in order to be eligible
to make a claim?
For example, you may be required to work a set number of hours in
order to meet the definition of 'employed'. There may also be
waiting periods before you can make a claim.
Questions for you to consider
Do you have other insurance which could cover your
If you have life insurance or income protection insurance (for
example through your super fund) you may already have similar
Are there other insurance policies that would suit you
Take a look at our section on different kinds of insurance.
Cooling off period
If you have 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 is important that you claim as soon as possible after the
insured event. A delay in claiming 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.
You should claim by contacting your insurer, not your lender or
the company that sold you the policy.
Don't be afraid to call your insurer to ask them questions about
whether you can claim for something under your policy.
The evidence that your insurer may require you to provide in
order to support your claim may be difficult to obtain. Don't be
afraid to speak to your insurer about alternatives particularly if
you are having financial difficulties or problems obtaining the
Under the General Insurance Code of Practice, where you are in
urgent financial need of benefits you can speak to your insurer to
fast track the assessment and decision making for your claim, and
ask for an advance payment within five business days of you
demonstrating this. 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.
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 resolution department.
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: 08 Aug 2016