Quick Check! Aussie Woman Who Inadvertently Purchased Insurance Gets Refund of Over $110,000

Australia's Channel 7 News reported on August 8 that a NSW woman who purchased "junk insurance" is relieved to receive a huge refund.

Teenah and her husband, Troy, recently received a refund of more than $111,000 after a Mortgage Protection Investigation.

Consumer advocates believe their case, and others that have come to light, may be just the tip of the iceberg.

Teenah said she and her husband suspected something was wrong with their mortgage after years of struggling to pay it off, only to find that the balance hadn't gone down, and that they had tried to terminate the insurance, but found the process "very difficult".

Later, Teenah saw a story in the news about junk insurance, which refers to unnecessary or worthless insurance attached to mortgages and credit cards.

She then contacted Claimo, a company that helps consumers find out if they've been misled into buying unneeded insurance.

It took around three years from the initial consultation to being paid out, but Teenah and Troy eventually managed to receive a refund of more than AUD111,000 in total.

In an interview with Channel 7 News, Teenah said, "I can't believe it, it feels like a normal person winning what would have been an unwinnable victory, we put the money straight towards our mortgage and will therefore own our home in a year or two rather than ten years or more, we're already seeing the mortgage balance decrease every week and we can finally breathe a sigh of relief and look forward to the future."

She also said that the refund was much more than they expected and at one point they considered buying something nice with the money, but ultimately made a wise decision.

The Australian Banking Commission has asked banks to set aside $10 billion to refund people who have purchased junk insurance through credit cards or loans.

According to Claimo, the four major banks have paid out about A$40 million in claims so far, while Claimo receives 30 percent of the refunds it helps secure.

Nathan Mortlock, director of Claimo, says: "If you have taken out a loan from a major bank in the early 2000s to the present day, whether it was a personal loan, a mortgage or a credit card, you were probably misled into buying additional insurance."

He explains that most consumers are not told that loan insurance is optional, and that it is bundled into the total loan amount at the time of signing the contract, which significantly increases the interest payable and results in the repayment of the loan taking up to a third longer.

Mortlock also pointed out that interest on the loan is often added to the loan insurance as well, which is a needless double whammy for consumers.

He emphasized that ensuring that compensated interest is included in refunds is a major victory, which significantly increases the refunds consumers receive.

Customers need to be proactive if they wish to receive a refund.

Mortlock said, "These banks are rarely proactive about refunds, and advocates like us have had to fight for these refunds, many of which have been very substantial and in some cases life-changing."

Mortlock suggests that the first step is to check whether the loan documents contain clauses such as "Consumer Credit Insurance" or "Mortgage Insurance".

If you're not sure, you should contact your financial institution; if insurance was added to the repayment, you probably also paid interest on that insurance by mistake.