Geelong Advertiser

Want ‘fries’ with your pur­chase? Think again

- With DAVID RANKIN Business · Consumer Goods · Personal Finance · Insurance · Credits · Social Security · Society · United Kingdom · Geelong

YOU know some­thing is not right when a fi­nan­cial prod­uct is ben­e­fit­ing the per­son who sold you it more than it is help­ing you.

At the top of the list of such un­help­ful fi­nan­cial prod­ucts is con­sumer credit in­sur­ance (CCI).

CCI is a “bolt-on” in­sur­ance pol­icy that is sold with credit cards, per­sonal loans, car loans and home loans and for which the seller earns com­mis­sion.

It is mar­keted as a way of help­ing a bor­rower make their re­pay­ments if they be­come un­em­ployed, sick or die.

Th­ese prod­ucts are of­ten re­ferred to as “junk in­sur­ance’’ and were the cause of the largest in­sur­ance scan­dal in the UK, as a re­sult of which more than $50bn was re­funded to Bri­tish con­sumers.

Cus­tomers are some­times not even aware they have pur­chased CCI.

When they have bought it and try to make an in­sur­ance claim, a high num­ber of th­ese are re­jected.

Where claims are suc­cess­ful, they of­ten pay out only a frac­tion of the out­stand­ing debt — as op­posed to the whole amount.

In 2016, the Aus­tralian Se­cu­ri­ties & In­vest­ments Com­mis­sion (ASIC) re­viewed the sale of such in­sur­ance poli­cies by car deal­ers and found them to be over­priced and to give lit­tle or no value.

Th­ese prod­ucts are, of course, not alone in their short­com­ings. Pet in­sur­ance is renowned for not of­fer­ing cover for pre-ex­ist­ing con­di­tions and for be­ing im­pos­si­ble to switch providers once a claim has been made for your pet. Not to men­tion the ease with which a provider is able to re­duce cover, in­crease pre­mi­ums and add ex­clu­sions year-on-year.

Mo­bile phone in­sur­ance can be ex­pen­sive too –— es­pe­cially when the cost of a high ex­cess is fac­tored in — with claims of­ten hard to make and re­place­ment hand­sets not al­ways like for like.

The bot­tom line? Think twice next time some­one tries to cross-sell in­sur­ance “fries’’ to you with the “burger’’ you are buy­ing from them.

David Rankin is a for­mer bank man­ager and founder of Geelong-based per­sonal bud­get­ing ser­vice Sort My Money.

 ??  ?? Amid the ex­cite­ment of get­ting that new car, stop to think if you re­ally need to take out con­sumer credit in­sur­ance.
Amid the ex­cite­ment of get­ting that new car, stop to think if you re­ally need to take out con­sumer credit in­sur­ance.
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