Financial literacy represents the knowledge and utilisation of different financial skills. This is thought to be a crucial life competency, enabling us to perform tasks such as creating effective budgets, saving for emergencies and retirement, and understanding how loans and credit work. However, financial literacy has never been as important as it was when dealing with junk insurance “ an incredibly shocking problem that has affected Australian consumers in quite unprecedented ways.
What is junk insurance?
In 2018, Australia's Royal Banking Commission revealed that the country's largest and most established banks have been deceiving consumers. They've done this by selling worthless and unnecessary insurance products along with credit cards and loans. These are add-on insurance products that are colloquially known as œjunk insurance. If you have taken out a loan or credit card or purchased a car on finance, you might have been paying for junk insurance as well. The biggest issue with these products is that they are essentially useless to consumers, offering cover you don't need or understand, while coming at a high price. Even worse, junk insurance was often sold unethically, with consumers not ever realising that they'd purchased it.
How to spot junk insurance
Most Australians have paid for junk insurance unknowingly. If you're not sure whether you're a victim of this malpractice as well, take a look at your documents. The clues can usually be found in your loan and credit card statements. If you don't have any documentation, you can always request your old statements from your financial institution. Look out for sections such as Guaranteed Asset Protection (GAP) Insurance, Consumer Credit Insurance (CCI), Extended Warranty Insurance, Loan Protection Insurance, Mortgage Protection Insurance, and Mechanical Breakdown Insurance (MBI). Since these were regular insurance payments, there's a possibility you've been paying interest on them as well.
Contacting claims experts
If you decide to refund junk insurance, the best solution might be to contact claims experts. By specialising in this form of add-on insurance, these professionals already have plenty of knowledge and experience in this field. They will go over your documentation for you and see whether you qualify for a refund. Once that has been established, they can also make a claim against your financial firm and manage the entire process, making sure you receive regular updates on the proceedings. This is a brilliant solution for saving time and money while also avoiding the stress of intimidating legal processes. And if you work with the best claims experts, you might not even be required to pay if your claim isn't successful.
Considering a class action
When attempting to get your money back on junk insurance, another option is to join a class-action lawsuit. This is a type of legal proceeding where one person (often through a law firm) makes a claim against a respondent on behalf of a larger group of people. At the moment, there are several class-action lawsuits against some of the major banks relating to the sale of junk insurance. You can join them by contacting the representative directly. However, you should also keep in mind that the sum that is typically received through a class action tends to be significantly less than what you were charged in the first place.
What you're entitled to
In certain instances, you might be part of a class action without being aware. This happens automatically when all policyholders are included in legal proceedings against a provider. The problem with this is the fact that you might not get any compensation if you're not contacted by the law firm that undertook the proceedings. By not receiving a refund in this process, that might also mean you've waived your right to complain directly to the insurance provider in the future, thus leaving you with no compensation. That is why it's crucial to check whether you are already included in a class action. Remember that you are entitled to full compensation for the amount you paid on junk insurance if you make an independent claim.
Avoiding issues in the future
Considering the fact that Australia's major banks have already been investigated and fined in relation to junk insurance, chances are low that you will unknowingly pay for this type of add-on insurance again. However, both financial institutions and insurance providers have been known to be deceitful throughout history. To prevent similar issues from arising in the future, it's always recommended to be cautious and reserved.Read each document carefully before signing to ensure you truly agree with the presented terms. Consider hiring a lawyer to streamline this process and prevent any misunderstandings with complex legal terms.
Evidently, financial literacy is vital in our daily lives. While you can easily refund junk insurance now, having extensive financial knowledge will prevent you from making the same mistakes in the future as well.
