Australian homeowner pockets $42,000 junk insurance refund after policy check

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.

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.

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.”