Consumer credit insurance (CCI) has long been marketed as a safety net for Australians taking out loans or credit cards. In 2025, with new regulatory scrutiny and evolving product offerings, it’s more important than ever to understand what CCI covers—and where it falls short. If you’re considering a loan, credit card, or mortgage, read on to discover how CCI works in today’s financial landscape, its recent reforms, and whether it’s a smart choice for your circumstances.
What Is Consumer Credit Insurance (CCI)?
Consumer credit insurance is designed to cover your loan or credit card repayments if you become unable to pay due to involuntary unemployment, illness, injury, or death. It’s commonly offered when you take out a:
- Personal loan
- Credit card
- Mortgage
- Car loan
CCI premiums are typically charged as a lump sum added to your loan or as a monthly fee. While it sounds reassuring, the reality is more complex. In recent years, the Australian Securities and Investments Commission (ASIC) has found that many CCI products provided poor value, with low claim payouts compared to the premiums charged.
2025 Reforms and What’s Changed
After a string of regulatory interventions, 2025 brings important changes to how CCI can be sold and what it must deliver:
- Stricter sales practices: Lenders and insurers must now provide clear, stand-alone information about CCI, and can no longer bundle it by default with loans or credit cards.
- Cooling-off periods: All new CCI policies sold in 2025 come with a mandatory 30-day cooling-off period, allowing you to cancel for a full refund.
- Improved disclosures: Product documentation must clearly outline what is (and isn’t) covered, including common exclusions like pre-existing conditions or self-employment.
- Higher value requirements: ASIC now requires CCI products to meet minimum payout ratios. Policies that historically paid out less than 20% of premiums as claims are being phased out.
These reforms are designed to prevent the mis-selling practices that plagued the sector throughout the 2010s and early 2020s, where consumers were often sold insurance they didn’t need or couldn’t claim on.
Should You Consider CCI? Weighing the Pros and Cons
While the industry is cleaning up its act, CCI still isn’t for everyone. Here’s what to consider before signing on:
- Coverage gaps: Many CCI policies exclude claims related to pre-existing medical conditions, casual employment, or self-employment. Be sure to read the fine print.
- Alternative protections: Check if you already have income protection, TPD (total and permanent disability), or life insurance through your super fund or another policy, which may offer broader or cheaper cover.
- Cost versus benefit: Even with new payout rules, some CCI products may deliver limited value for the premiums charged. Ask your lender for a quote and compare it to standalone insurance options.
- Personal circumstances: If you have little or no savings, limited family support, or precarious job security, CCI could provide peace of mind in the short term—provided you understand the exclusions.
Example: Emily, a Sydney-based nurse, took out a $15,000 car loan in early 2025. Her lender offered CCI for $600 upfront. After reading the PDS, she realised her existing income protection via her super would cover loan repayments if she was injured or ill—rendering CCI unnecessary in her case.
Shopping Smart: Tips for Australians in 2025
If you’re weighing up CCI, keep these strategies in mind:
- Don’t feel pressured—You’re not required to buy CCI to get a loan, and it’s illegal for lenders to tell you otherwise.
- Use the cooling-off period—If you have second thoughts, cancel within 30 days for a refund.
- Request the Key Facts Sheet—All providers must supply this. It summarises features, exclusions, and costs in plain English.
- Compare alternatives—Standalone income protection or trauma insurance may suit your needs better.
- Review your super—Many Australians are unaware they already have insurance cover through their superannuation fund.
Conclusion: Is Consumer Credit Insurance Worth It?
CCI can be a financial lifeline for some, but in 2025, Australians should approach it with eyes wide open. Regulatory reforms mean better protections and transparency, but the onus is still on borrowers to scrutinise what’s offered. Before signing up, compare policies, read the fine print, and consider whether your personal situation truly warrants the extra protection.
