Source : Perth Now news
An Australian homeowner has pocketed a major refund after coverage he thought was mandatory was found to be junk insurance.
The mortgage protection policy was attached to a home loan Western Australian man Nick took out with a major big four bank in 2012.
“We were told we had to have it because the loan was a certain amount of money,” Nick said.
“It was of no benefit to us. It wasn’t to protect us, it was to protect them — the bank.
“We paid a rather large amount of money for nothing.”
The policy, which added directly to the cost of servicing the loan, was meant to provide life and disability cover in the unfortunate event something happened to him.
Experts say these products can become problematic because people are often paying for cover they already have through their superannuation.
More than a decade after taking out the home loan, Nick decided to check whether he had been charged for unnecessary insurance or fees.
Claimo, which is among companies that investigate junk insurance and handle compensation claims on behalf of customers, reviewed Nick’s loan and found more than $26,000 in premiums had been added to it.
The company pursued the matter with the bank and secured a further $15,689.16 in loan and compensatory interest, taking Nick’s total refund to $41,838.
“We paid the mortgage off and had a little bit of cash left over for a holiday,” Nick told 7NEWS.com.au.
“It made us debt-free. It was an amazing amount of money.”
Claimo managing director Nathan Mortlock said Nick’s case sits squarely within the broader junk insurance remediation that followed a Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
The commission’s report revealed that millions of people had been duped into buying junk insurance, which refers to coverage that’s either unnecessary or worthless.
“The banks ultimately set aside billions of dollars to compensate customers for problems across wealth, insurance and other financial products, including consumer credit insurance,” Mortlock said.
“These policies were commonly sold alongside home loans, personal loans and credit cards, and were meant to provide a safety net if someone became sick, injured, unemployed or died.”
A vice principal received a $6500 refund after Claimo looked into junk insurance attached to two car loans, while a mother previously told 7NEWS.com.au she could finally “breathe and look forward to the future” after pocketing $111,000 following an investigation into mortgage protection she was sold.
“The problem was that many people were paying for cover they didn’t need, couldn’t properly claim on, already had elsewhere, or in some cases didn’t even realise had been added to their loan,” Mortlock told 7NEWS.com.au.
The junk insurance message for millions of Australians
Claimo, which takes a 30 per cent fee from any refund it helps secure, has encouraged Australians to review historic lending arrangements tied to home, car, and personal loans, credit cards and other consumer finance, saying millions of consumers could be impacted by junk insurance problems.
The Australian Financial Complaints Authority (AFCA) received 7880 complaints about add‑on or junk insurance in 2024-25.
“We resolved more than 4500 of these complaints, helping to deliver better outcomes for affected consumers,” the authority said.
“Complaints commonly raised concerns about unfair sales practices, poor product design, inadequate disclosure and instances of misrepresentation or undue pressure.”
