Overview — Credit-related insurance contracts

The National Credit Code (NCC) regulates some aspects of insurance in connection with credit contracts.

Making insurance compulsory is generally prohibited (although there are exceptions such as for mortgaged property insurance (MPI)), and the debtor or guarantor cannot be required to take out insurance with a particular insurer.

Financing mortgaged property insurance is only allowed for terms up to a year (but renewals are permitted), and consumer credit insurance (CCI) commissions are capped at 20% of the premium.

The debtor must be given a copy of the policy and prescribed information within 14 days after the proposal is accepted, if the premium for CCI or MPI is financed.

When the insurer rejects a proposal for CCI or MPI to be financed, the insurer must inform the credit provider and the debtor and the credit provider must ensure the debtor is refunded.

When a credit contract ends, a financed CCI contract also terminates. A debtor has the right to terminate financed MPI when the credit contract terminates.

Special provisions apply to CCI sold by banks over the phone and in branches, and ASIC is considering changes to the sale of add-on insurance warranties through car yard intermediaries.

Please refer to Credit-related insurance contracts for further details.