Responsible Credit-related Insurance Code
Credit-related insurance is a type of insurance designed to protect your lifestyle and/or your vehicle if something goes wrong. This Code is to make sure consumers understand their rights and obligations when dealing with types of credit related insurance and providers.
What is Credit-Related Insurance?
Credit-related insurance is designed to protect your lifestyle and your vehicle if something goes wrong. Types of credit-related insurance are:
Consumer Credit Insurance which includes Credit Contract Indemnity, Payment Protection Insurance, and Repayment Waivers, and covers your obligations under a credit contract, and may protect you and your family if you are off work due to accident, illness, redundancy, or hospitalisation. It may cover your loan repayments in these events or repay your loan in full in the event of your death.
Guaranteed Asset Protection to cover the gap between what your vehicle insurance pays out and the balance you owe under your loan agreement if your vehicle is written off.
Motor Vehicle Insurance covers accident, loss or damage to your motor vehicle. It will almost always be required if a loan had been provided for you to purchase the vehicle.
Why get it?
Having appropriate credit-related insurance protection may mean your loan repayments are covered if something goes wrong, or your loan is repaid in full if you die, and your credit rating is protected in the event of insure loss.
It can also mean your asset may be covered if it is lost or damaged through accident, fire, or theft, or that your loan is repaid in full if your vehicle is written off. You may also be able to purchase mechanical breakdown insurance covering your vehivle against defined mechanical or electrical failure.
Is Credit-Related Insurance compulsory?
You do not have to buy credit-related insurance, except in the instance where it is a condition of taking out the loan. You do not have to take it out with the credit-related insurance provider recommended by the lender.
How should a responsible provider of credit-related insurance behave?
Responsible credit-related insurance providers will:
Ensure that the insurance product being provided meets your requirements and objectives and that it provides cover against the risks you are seeking to cover.
Ensure that the policy sold is appropriate when compared to the loan amount or credit limit or value of the asset being insured.
Assist you to understand the terms of your insurance contract and make sure you understand key features like how much it will cost (the amount of the premium); if the premium is being added to the loan, the total amount of interest that will be paid over the term of the loan; what the insurance contract covers you for (and what it does not); how long you are covered for, and the period of time during which you can cancel the policy if you change your mind after taking it out.
What are my responsibilities as a consumer?
Consumers must act honestly and provide real and accurate information when applying for credit-related insurance, or when making a claim. If you need to make a claim under your policy, do so as soon as possible after the incident or situation occurs.
Read and understand your terms and conditions, keep a copy of your contract, and contact your provider if circumstances change or something needs updating;
All motor vehicles should be covered by comprehensive insurance (this may be a requirement if you have taken out a loan to buy the vehicle). If this is not required and the vehicle is of low value then at least third-party insurance should be held. This protects you if you cause damage or loss to someone else's property but you are still however responsible for your own damage or losses.
Responsible credit-related insurance providers will…
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Ensure all their products comply with all requirements under New Zealand law. They should be easy to get hold of, return your calls, answer your questions and allow you to make sufficient inquiry to satisfy yourself that you are getting value for money.
They should give you a policy document written in plain English explaining what you are covered for and what you are not, and include full instructions for making a claim on your insurance policy if necessary and help you to make a claim.
They will make a decision on claims and communicate this to you as soon as possible.