Junk Insurance - Everything you need to know

In 2018, the Financial Services Royal Commission revealed that consumers have been sold unnecessary insurance products by the biggest four banks in Australia, often attached to credit cards and loans. These policies have been dubbed as “junk insurance”, not only due to their worthless nature, but also the questionable practices that have been used during sales. In case you have taken out a loan or credit card, or even purchased a vehicle on finance, you might have been unknowingly paying for a form of junk insurance that you don’t understand or need as well.

What is junk insurance?

Being a form of add-on insurance, junk insurance includes a range of policies that insurance companies and banks often sell along with loans and credit cards. While different forms of add-on insurance might be beneficial to some consumers, these policies are often referred to as “junk” due to the misleading and deceptive practices under which they are sold. For example, insurers might have used unfair, high-pressure sales tactics, signed you up without your full understanding and explicit consent, or even offered you insurance that was worthless to you due to your previous insurance coverage or general personal needs.

Types of junk insurance

Junk insurance can come in a number of different forms, most of which are thought to be unnecessary for the majority of consumers. However, the most common forms of add-on insurance are Consumer Credit Insurance (CCI) that covers the inability to make payments due to injury, illness, unemployment, and death, Guaranteed Asset Protection (GAP), covering the gap between comprehensive insurance payments and what you owe in case your car gets written off, as well as Extended Warranty, which offers coverage for components and parts of goods in case of failures and defects. While these junk insurance policies might seem attractive at first, they often come with many exclusions and worthless coverages.

Claiming a refund

In case you’ve been sold add-on insurance unknowingly, it might be wise to claim a junk insurance refund as soon as possible. As making a claim can often be a challenging and time-consuming process, it’s recommended to contact a claims expert with plenty of experience in add-on insurance. Such experts will be able to check all of your documentation to ensure eligibility, send necessary information requests to your financial institutions, and begin the claims process on your behalf, while offering regular updates and relevant information. What’s more, these insurance experts often work on a “no win, no fee” basis, meaning you won’t get charged if your claim doesn’t end up being successful.

Joining a class action

From life insurance policies to car and credit car loans, junk insurance has been sold along with regular policies to thousands of consumers without their specific understanding or consent. For that reason, a number of class-action lawsuits are currently active against major corporations such as Allianz and ANZ who have sold junk insurance using dubious practices. If you wish, you could also join a similar class action in an effort to receive a refund for your add-on insurance payments. However, it’s important to note that such procedures could be quite lengthy and offer low payouts, which is why it’s generally recommended to opt-out of class actions and claim a refund independently instead.

Knowing if you are eligible

If you still aren’t sure whether you have been sold and unknowingly paying for junk insurance, there are several ways to find out whether you are eligible for a refund. For instance, you might want to look at any documents and policies you’ve signed, look through loan and credit card statements, review regular insurance payments, or even contact your financial institution to request necessary documents. If you notice any of the add-on insurances mentioned above, such as CCI or emergency health care, you might be eligible for a refund.

Due to its ambiguous nature, junk insurance is often considered to be an unnecessary and worthless form of insurance many consumers were unwittingly sold under false pretenses. Fortunately, class action lawsuits and claims experts might be able to help and provide compensation to any wronged party.