Credit rated insurance

Lenders may ask you to take out Consumer Credit Insurance (CCI). They can't force you to take out this insurance; it's entirely your choice. Some CCI insurance policies cover loan repayments if you are unable to make them because of unemployment, illness or death. However, there are usually conditions when a claim won't be paid or limits to the number of repayments covered. You should read the policy carefully to know what is covered. These forms of insurance often incur an annual premium charge.
If the lender has asked for security over the loan then they will usually need you to insure the security against loss or damage. An example is a car that will need to be comprehensively insured.

Shortfall or gapcover insurance is generally offered when you take out comprehensive car insurance but you can't be forced to take it out. Gapcover insurance covers any difference between the comprehensive insurance cover and the outstanding loan balance if the car is a total loss. For example, if your car is comprehensively insured for $8,000 and your outstanding loan is $12,000 at the time that the car is written off (due to an accident or because it's been stolen and not recovered) then gapcover insurance will pay $4,000 to the lender.

Before taking out this type of insurance check the policy for:

• the amount the insurer will pay on a claim;
• when a claim will be paid.

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