Claiming credit insurance

Consumer credit insurance (CCI) is insurance that covers you if something happens that affects your capacity to meet the payments on your loans and other credit. CCI usually covers situations of unemployment, illness, involvement in an accident, and death.

Your lender may offer you the opportunity to take out CCI at the time they approve your loan, and the premium may be included in the amount you borrow. Beware, as it is expensive and usually of little or no value. CCI insurance will usually only cover your loan repayments for a period of three months following job loss.

Find out more information on consumer credit insurance.

Are you insured?

You should check all your loan agreements to see if you have consumer credit insurance for events like job loss and illness. You may have taken a policy at the time you signed your loan contract, and the premium may even have been included in the loan.

If you are still unsure if you have insurance, you should contact your lender and ask for details of a copy of your insurance policy and instructions about how to make a claim.

If you determine that you have insurance for your loans in the case of job loss, you should lodge a claim with your insurance company as soon as possible after your retrenchment; or as soon as you realise you will not be able to pay your loan because of your loss of income.

It may be difficult to keep track of consumer credit insurance, particularly if the insurance business is sold or merges with other companies. Your policy will only be valid if you are paid up on all due premiums.

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When you lodge your claim

When you lodge a claim for credit insurance you’ll need to provide copies of all documents that prove your change of circumstances, including your letter of separation from your former employer and your termination pay advice. You should keep a record of all phone contact and a copy of all correspondence you have with your lender and the insurance company.

Don’t let your lender discourage your from lodging an insurance claim if you think it might apply to your circumstances.

Keep a copy of your correspondence and the claim form you submit.

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While your insurance claim is being assessed

If you cannot afford to make your loan repayments while you wait to hear the outcome of your insurance claim you should notify your lender in writing that:

  • you have lost your job or are working reduced hours; and
  • you are unable to make a payment that is due; and
  • you have lodged a claim on your consumer credit insurance.

You should also request that the lender postpone all debt enforcement action pending the outcome of the insurance claim, and ask them to confirm their willingness to do so in writing. If they do not agree, lodge a complaint immediately with your lender’s ombudsman scheme – either the Financial Ombudsman or the Credit Ombudsman.

If you have not heard from the insurance company about your claim after two weeks, phone to check they received your claim and ask when they expect to make a decision. The insurer must provide you with a progress report on your claim every 20 business days.

The insurer is required to notify your lender that you have submitted a claim. This notification should mean no steps will be taken to enforce the loan until the claim has been processed.

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If you need your claim paid out urgently

If you’ve lost your job and have lodged a consumer credit insurance claim, and you can show urgent financial need of the benefits of the claim, your insurer should:

  • fast track the claim assessment and decision; and
  • make an advance payment to alleviate your immediate financial difficulties within five business days of you satisfactorily demonstrating financial need; and
  • notify any financial institution you have told them has an interest in your claim.

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If your claim is denied

If your claim is denied, and you don’t think it should have been, you should immediately lodge a complaint with the insurer’s Internal Dispute Resolution department requesting that the matter be reconsidered. If you are still not satisfied with their decision you should ask the Financial Ombudsman Service to investigate your right to a pay out under your policy.

You must bear in mind that insurance policies do not cover consumers against all losses. Typically, there will be exclusion or limitation clauses restricting the circumstances when the insurer pays out on claims.

For instance, a policy for protection against job loss may not be valid if you’re simply working reduced hours and not completely out of the workforce. It may also not apply if your work is in a contract or temporary position.

Contact Consumer Action Law Centre on 1800 466 477 or the Financial Ombudsman Service if there’s a dispute about your entitlement under any insurance policy.

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