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How to get your money back if you got “junk insurance”

Been ripped off by junk insurance? Here's how to demand a refund.


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If you've applied for a car loan, a personal loan or a credit card, you might have been mis-sold insurance that you didn't actually need.

For years, companies have been ripping off customers with consumer credit insurance (CCI), gap insurance and used-car extended warranties. These are commonly sold with cars, credit cards and loans, and they could be costing you thousands of dollars.

"Check your paperwork for any insurance or warranties you might not know about, or that you felt pushed into buying,"

says Susan Quinn, senior policy officer at Consumer Action Law Centre.

Consumer Action chief executive Gerard Brody estimates that at least $350 million worth of CCI has been sold to Australians when they didn't need it. And this doesn't include other types of "junk insurance" such as gap insurance and used-car extended warranties.

Potential types of junk insurance you should keep an eye out for

  • Consumer credit insurance (CCI) is designed to cover you if you're unable to pay your loan. For instance, it can help if you are made redundant or lose your job. However, it's essentially useless if you don't have a job or are in casual work, as you won't qualify for a payout in these cases.
  • Gap insurance is supposed to cover the amount left on a car loan if the car is written off or stolen. However, if you buy comprehensive car insurance or already have it and your car is written off, the payout of either an agreed value or the market value should cover all or most of your car loan anyway.
  • Used-car extended warranties are sometimes sold to customers when the car is still covered by the manufacturer warranty, meaning that you're effectively paying for two types of the same cover.
  • Car dealer-issued warranties are "administered" by warranty companies or insurers, but they are not legally liable if you make a claim. Car dealers are also often not responsible under the warranty so nobody is obligated to pay your claim.

You don't need to purchase add-on insurance or warranties to get a loan. If a company has tried to sell this to you, it's against the law.

Bought one of these? Here's how to get your money back

If you've been sold insurance without your consent or knowledge, the Demand a Refund campaign, set up by the Consumer Action Law Centre, might be able to help.

"Even if you did choose to buy it, it may be worthless to you. And if so, you should demand your money back. can help you do that,"

advises Quinn.

To see if you are entitled to a refund, you can get in touch with the Consumer Action Law Centre at If you're not happy with the insurer's offer or they don't respond within 45 days, you can lodge a complaint with the Australian Financial Complaints Authority (AFCA) online.

How to avoid being sold junk insurance

  • You probably don't need the add on or extra product you haven't asked for. If the salesperson is trying to sell you something that's actually worth having, they'll be more than happy for you to sleep on the decision, so walk away and consider your options. Never just agree to the add-on on the spot.
  • Be wary of sales tactics like trying to get you to sign papers quickly without properly checking them over. You should be in no hurry, so take your time and think about it.
  • In some cases, you might be required to buy comprehensive car insurance if you're taking out a car loan. However, you don't need to buy insurance from the lender, which will usually cost more and might come with more exclusions. To compare your options yourself and find an insurance policy that works for you, you can buy comprehensive car insurance online.
  • You are never required to buy consumer credit insurance, and if they say you are, they are breaking the law.

Alternatives to junk insurance

Want to get protected but avoid being ripped off? Check out these alternatives to junk insurance:

  • Swap gap insurance for comprehensive car insurance. If your car is written off but you're still paying off the loan, comprehensive car insurance can ensure that you're not paying for a car you no longer own. With comprehensive car insurance, you'll receive a payout of either an agreed value or the market value. Before signing up to a policy, check that this value is enough to pay off your car loan.
  • Go for add-ons that actually do something. Windscreen replacement insurance takes your excess back down to zero so that you're not out of pocket if your windscreen is damaged and needs to be repaired. In other words, you're not out of pocket if something chips your car windows.
  • Ditch consumer credit insurance (CCI) for an affordable policy. If you're worried that you won't be able to pay for your car insurance, there are plenty of cheap policies available online including third party property insurance and third party fire and theft car insurance. Reviewing your policy regularly and comparing it to other policies is another savvy way of keeping costs down.

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