Insurance Options - Loan Place

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Insurance and Protection Options

When you’re looking to finance a big purchase it’s not just the different types of loans and leases that you need to consider there are the insurances too. There are plenty of options when it comes helping to protect you and your asset.

LoanPlace.com.au is here to help you make sense of it all by providing you with information resources and connecting you with experienced professionals who will search their lenders and insurers to find the latest deals so you get 3 Free Quotes to evaluate and compare.

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The available products

There can be lots of different names and terminology used to describe the products but essentially there are up to 5 options that you will have access to:

Comprehensive Insurance
Warranty
Loan Protection
GAP
Roadside Assistance

Consider whether insurance products are worth it, for more information click here.

Comprehensive Insurance

Also known as

Motor Vehicle Insurance (for vehicles)
Comp Insurance

Summary of protection provided

Comprehensive insurance covers you for damage to your asset, as well as loss and theft of your asset and damage to other people’s property such as their vehicle.

Is it actually an insurance product?

Yes, and as such the insurer is regulated by APRA (Australian Prudential Regulation Authority).

Can you pay for it within your finance?

Yes, but be aware that if you finance the cost of the comprehensive insurance you will pay interest on it. Also, comprehensive insurance policies generally run for 12 months so if you are taking your finance out over a longer period you will have to renew the policy after the first year and will not be able to include the renewal cost in your finance.

Pros

You get cover not only for damage to other people’s property but for damage to and theft of your asset also.
It could help to save you a substantial amount of money in the event of an accident or theft.
Many policies include additional benefits such as hire vehicles, cover for emergency expenses, windscreen and glass replacement.

Cons

Costs can vary substantially from insurer to insurer.
An excess can apply in the event of a claim, meaning that you will be required to contribute to the costs if you were at fault or if your insurer is unable to recover the full costs from the other party.
Depending on your age and driving history you may face additional excesses.
Cover levels, excesses and extras can vary between insurers making comparisons more difficult.

Things to consider

If you are using your asset as security for your loan or lease then the lender will normally require the asset to be comprehensively insured.
Younger and less experienced users will generally face higher premium costs.
Your history including any accidents, infringements and demerit points will affect the cost of your premium. The more adverse history that you have the higher the premium will generally be.

Warranty

Also known as

Warranty Insurance
Warranty Service Contract
Warranty Service Plan
Extended Warranty
Mechanical Breakdown Cover

Summary of protection provided

Warranties provide coverage beyond the manufacturer’s warranty period in the event that your asset experiences unexpected mechanical failure. The cost of the required repairs, including replacement parts and labour may be paid for.

Is it actually an insurance product?

Warranties can be issued as insurance products but unless it is clearly stated that it is an insurance policy then it probably isn’t. Ask the seller of the product and check the terms and conditions. If it is an insurance product the insurer is regulated by APRA (Australian Prudential Regulation Authority).

Warranties are often issued as service contract or service plan arrangements. Whilst the coverage may well be similar to an insurance product they aren’t insurances, which means that you don’t necessarily have the same levels of consumer protection as you get with general insurance products. For example, you may not have a cooling off period or be entitled to a rebate if you cancel it during the cover term.

Can you pay for it within your finance?

Yes, but be aware that if you finance the cost of the warranty you will pay interest on it.

Pros

You could be covered for the cost of replacement parts and labour in the event of repair being required.
Some warranties come with a pay by the month option that is separate to your finance.
Some warranties offer the same or similar levels of cover to those provided by manufacturers on new assets.

Cons

Coverage and claims limits can vary significantly between warranties.
Some warranties require you to service your asset more often than the manufacturer’s recommendations.
Some warranties can be very expensive.

Things to consider

Check whether the warranty is an insurance product or not.
If the warranty is a service contract or service plan you will be obliged to get your asset serviced with that retailer or dealer to maintain the cover.
Check the terms and conditions to see what exactly is and isn’t covered. Also, pay close attention to the items that are listed as being excluded from cover.
If you do not get the asset serviced as per the requirements outlined in the warranty’s terms and conditions the cover will normally be voided.
Wear and tear and consumable items such as oil, replacement bulbs etc. are not covered by warranties.
Extended warranties are optional and do not replace the consumer guarantees that suppliers must comply with under Australian Consumer Law.
Ask the seller to explain and list what it gives you over and above your automatic consumer guarantees.

Additional Information – Consumer Guarantees

Under the Australian Consumer Law, when you buy products and services they come with automatic guarantees that they will work and do what you asked for. If you buy something that isn’t right, you have consumer rights.

Businesses must guarantee products and services they sell, hire or lease for – Under $40,000 and over $40,000 that are normally bought for personal or household use. Business vehicles and trailers are also covered, irrespective of cost, provided they are used mainly to transport goods.
Businesses must provide these automatic guarantees – Regardless of any other warranties they give to you or sell you.
If a business fails to deliver any of these guarantees – you have consumer rights for repair, replacement or refund, cancelling a service and compensation for damages and loss.
Consumer guarantees on products and services – Since 1 January 2011, the following consumer guarantees on products apply:
Products must be of acceptable quality, that is:safe, lasting, with no faults; look acceptable; do all the things someone would normally expect them to do. (Acceptable quality takes into account what would normally be expected for the type of product and cost.)

Products must also: match descriptions made by the salesperson, on packaging and labels, and in promotions or advertising; match any demonstration model or sample you asked for; be fit for the purpose the business told you it would be fit for and for any purpose that you made known to the business before purchasing; come with full title and ownership; not carry any hidden debts or extra charges; come with undisturbed possession, so no one has a right to take the goods away or prevent you from using them; meet any extra promises made about performance, condition and quality, such as life time guarantees and money back offers; have spare parts and repair facilities available for a reasonable time after purchase unless you were told otherwise.

Who to claim a remedy from – You can claim a remedy from the retailer if the products do not meet any one or more of the consumer guarantees, with the exception of availability of spare parts and repair facilities. The retailercan’t refuse to help you by sending you to the manufacturer or importer.
You can claim a remedy directly from the manufacturer or importer – If the goods do not meet one or more of the following consumer guarantees: acceptable quality; matching description; any extra promises made about such things like performance, condition and quality.

Repairs and spare parts – the manufacturer is responsible for ensuring that spare parts and repair facilities (a place that can fix the consumer’s goods) are available for a reasonable time after purchase unless you were told otherwise. How long is ‘reasonable’ will depend on the type of product.

You are only entitled to recover costs from a manufacturer or importer, which include an amount for reduction in the product’s value and in some cases compensation for damages or loss.

Consumer guarantees do not apply if you – got what you asked for but simply changed your mind, found it cheaper somewhere else, decided you did not like the purchase or had no use for it; misused a product in any way that caused the problem; knew of or were made aware of the faults before you bought the product; asked for a service to be done in a certain way against the advice of the business or were unclear about what you wanted.

Rights to a repair, replacement, refund, cancellation or compensation do not apply to item – worth more than $40 000 purely for business use, such as machinery or farming equipment; you plan to on-sell or change so that you can re-supply as a business; bought as a one-off from a private seller, for example at a garage sale or fete (but you do have rights to full title, undisturbed possession and no unknown debts or extra charges); bought at auction where the auctioneer acted as an agent for the owner (but you do have rights to full title, undisturbed possession and no unknown debts or extra charges);

Different laws apply to insurance or financial services and for products or services you bought before 2011.

Making a consumer complaint – there are 3 steps to follow when making a complaint:

Step 1 – Contact the seller or service provider

Step 2 – Contact the ACCC (Australian Competition & Consumer Commission) – www.accc.gov.au , Tel. 1300 302 502

Step 3 – Take legal action

Loan Protection

Also known as

Consumer Credit Insurance (CCI)
Payment Protection

Summary of protection provided

Loan protection pays or contributes to your loan repayments if you are unable to work due to injury, illness or involuntary unemployment. It also repays the outstanding finance amount in the event of death. Other variations are available which involve handing back the asset and having the outstanding finance paid.

Is it actually an insurance product?

In most cases it is, and as such the insurer is regulated by APRA (Australian Prudential Regulation Authority). Be aware that some covers are offered that aren’t insurance products which means that you don’t necessarily have the same levels of consumer protection as you get with general insurance products. For example, you may not have a cooling off period or be entitled to a rebate if you cancel it during the cover term.

Can you pay for it within your finance?

Yes, generally the cost of the loan protection must be included within the finance. This means that you will pay interest on the premium.

Pros

Loan protection provides you with some financial security in the even that you suffer from a covered event.
You often have the flexibility to choose a level of cover that suits your circumstances. For example, if you feel that you have plenty of life cover you may decide to exclude this element of cover from your loan protection.
It can help you to keep your asset at a time when you may need it most. For example, using your vehicle to get to medical appointments if you’re ill or to attend interviews if you had been made redundant.
It can help to protect you credit rating and ability to get credit in the future.

Cons

The cover can be expensive and increase your finance amount and repayment amount noticeably.
There are usually waiting periods for claims for injury, illness and involuntary unemployment.
Cover is usually significantly more expensive for people who are self-employed.
Policies are subject to cover limitations and exclusions.

Things to consider

Check whether the loan protection is an insurance product or not.
Any benefits payable from a claim are paid directly to the lender, not to you.
In the event of redundancy, cover is usually not provided if you volunteer to leave your employment or if you are dismissed from your duties for being unsuitable for the position.
If the policy is an insurance product then a rebate is usually automatically included in the payout figure quoted by the lender if you are looking to pay off your finance early.

Gap

Also known as

Shortfall Insurance
Asset Protection
Motor Equity Insurance

Summary of protection provided

If your asset is declared a total loss write off as a result of an accident or theft before you have paid off your finance, gap is designed to cover the difference between what your comprehensive insurer pays and the amount still owing on the finance (up to a specified limit).

Is it actually an insurance product?

In most cases it is, and as such the insurer is regulated by APRA (Australian Prudential Regulation Authority).

Can you pay for it within your finance?

Yes, but be aware that if you finance the cost of the warranty you will pay interest on it.

Pros

Gap can provide substantial financial assistance in the event that your asset is written off and you still have finance owing.
Many policies come with additional benefits that pay an amount directly to you to assist with the costs associated with replacing your asset, e.g. deposit, government charges etc.
You often have the flexibility to choose a level of cover that suits your circumstances.

Cons

The cover can be expensive and increase your finance amount and repayment amount noticeably.
If you are purchasing a new asset and the comprehensive insurance provides cover for a new for old replacement in the event of a total loss write off, gap will provide you with little benefit.
Gap can offer minimal benefits if you have set your finance up over a shorter term and are putting a large (30% +) deposit in.

Things to consider

Check whether the gap is an insurance product or not.
Any shortfall benefits payable from a claim are paid directly to the lender, not to you. Any additional benefits would be paid to you.
The value of the majority of vehicles and other assets depreciate quite considerably over time, often more quickly than the outstanding finance reduces. This means that you can be at risk of owing more on your finance than your asset is worth for a substantial period of your loan or lease term. This is a greater risk if you have taken out your finance over a long period (5 years +) and you’re putting in 0 or minimal deposit.
If you use your asset for hire or reward e.g. taxi, courier etc. you may not qualify for cover.

Roadside Assistance

Also known as

Breakdown Cover

Summary of protection provided

Assistance if your vehicle breaks down.

Is it actually an insurance product?

No, it’s usually an annual membership service.

Can you pay for it within your finance?

Yes, but be aware that if you finance the cost of the roadside assistance you will pay interest on it.

Pros

Relatively low cost for annual cover which could save you considerable hassle and some expense if you breakdown, especially if you’re a distance from home.
Some memberships come with additional benefits, for example, emergency car rental and accommodation.

Cons

If you do low kilometres and don’t travel far away from home it may be an unnecessary expense.
Low costs may draw you in but you might get sold up to a more comprehensive level of cover at a higher membership fee.

Things to consider

Check to see if the service is backed by a reputable provider.
Check to ensure that it provides 24 hour coverage, 7 days a week across regions that you are likely to travel to.

Finance brokers are generally also qualified to advise you on general insurance products. They can be a great source of information and often have access to a range of insurers to help you choose the right protection options for you.