Skip to content   Skip to footer navigation 

Are you owed a refund for that extra car insurance you bought? 

Consumers who were unfairly sold 'add-on' insurance before July 2019 have until 30 June to demand their money back. 

salesperson discussing contract with car buyer
Last updated: 06 May 2025
Fact-checked

Fact-checked

Checked for accuracy by our qualified verifiers and subject experts. Find out more about fact-checking at CHOICE.

Need to know

  • Add-on insurance has long been regarded as an unnecessary financial product flogged by salespeople chasing commissions
  • In the wake of various ASIC investigations, a number of providers have agreed to refund over $130 million to customers who were sold add-on insurance unfairly.  
  • If you were unfairly sold add-on insurance before July 2019, you have until 30 June 2025 to file a complaint with AFCA

The opportunity to upsell can be like catnip for a salesperson, especially if there's a hefty commission to be had. When you're a customer plunking down tens of thousands on a car and have entered an altered state of mind, the salesperson knows they've got you right where they want you. In the heat of the moment, they convince you to buy stuff you don't need. 

This is the story behind 'add-on' insurance – also known as junk insurance – a type of extra cover that car dealers in particular are fond of foisting on unsuspecting customers. 

It has long been regarded as a product consumers get talked into buying by self-serving salespeople. The commissions they stand to make are generally around 20%. 

A number of providers have agreed to refund over $130 million to customers who were sold add-on insurance unfairly

Add-on insurance has been the subject of a series of reviews and regulatory actions by the Australian Securities and Investments Commission (ASIC) that go back to 2011. The regulator has targeted inappropriate and unfair sales tactics and terms and conditions that greatly favour the insurer. 

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry also addressed several issues with add-on insurance in its 2018 hearings. After its 2019 final report came out, a number of firms made changes to improve consumer outcomes. But most firms – to their credit – stopped selling it altogether. 

In the wake of the ASIC investigations, a number of providers (outlined below) have agreed to refund over $130 million to customers who were sold add-on insurance unfairly. 

Mandatory four day waiting period 

Since new regulations came into effect on 5 October 2021, car dealers have had to wait four days after a car purchase before trying to sell you add-on insurance, a move aimed at shifting these transactions away from the pressure-sales environment of the car dealership. 

If you were sold add-on insurance after buying a car before this mandatory pause, you can file a complaint with the Australian Financial Complaints Authority (AFCA) asking for your money back.

This also holds true if you believe you were unfairly sold add-on insurance before July 2019, but in this case you only have until the end of this financial year, 30 June 2025, to file a complaint with AFCA due to time limits.  

AFCA is designed to be a free and simple alternative to a court or tribunal process ... If you have a complaint, please make sure you lodge by the deadline

AFCA lead ombudsman for insurance Emma Curtis

"It's important that consumers know this deadline is fast approaching," says AFCA's lead ombudsman for insurance, Emma Curtis, adding that "AFCA is very familiar with add-on insurance and the issues that arose in sales of this product". 

"AFCA is designed to be a free and simple alternative to a court or tribunal process, without people needing to pay for representation. If you have a complaint, please make sure you lodge by the deadline," Curtis says.

salesperson handing car keys to buyer

Add-on insurance comes in many varieties, none of which offer good value for money.

The extra insurance you don't really need 

Add-on insurance comes in many flavours when it comes to new car sales. Here's a sample of what's on offer, with an explanation of why it's not good value:

  • Tyre and rim insurance – It covers you if you damage your tyres or rims while driving due to poor road conditions, but doesn't cover general wear and tear. Replacing or repairing your tyres or rims will probably cost less than the insurance policy. 
  • Mechanical or motor breakdown insurance – An extended warranty that covers you for mechanical failures or defects, but it doesn't kick in until your manufacturer's warranty has expired, which can range from three to seven years or a certain number of kilometres (generally 100,000). You also have guarantees under consumer law on top of your warranty, so this third level of cover is highly unlikely to be worth it. 
  • Guaranteed asset protection (GAP) insurance – Also known as 'motor equity insurance' or 'shortfall insurance', it supposedly covers you if your car is a write off after an accident and there's a gap between what you still owe the car loan provider and what you get from your insurance claim. The problem is that the value of your car and how much you owe the lender are continually decreasing, so the longer you have your GAP insurance, the less likely it is that you'll receive any payout on any claims. 
  • Loan termination insurance – If you can't make the payments on your car loan due to illness, injury or death and it has to be returned to the dealer, this insurance product promises to pay the difference between what the car is worth and what is still owed on the loan. But the terms and conditions are tilted in favour of the insurer. For instance, it may cover you for accidental death, such as if you're hit by a car, but not death from illness. And there are caps on any payouts. 
  • Consumer credit insurance – Allegedly covers your loan repayments (including car, personal and home loans as well as credit card debt) if you lose your job, get sick or injured, or die. But the reality is that any payout will be much less than you would expect due to the tricky terms and conditions, and your debt will not be cleared. Plus you may already be covered under life or income protection insurance or your home or car insurance policy.  

Companies that have sold or still sell add-on insurance

If you were unfairly sold add-on insurance from one of these or another provider before July 2019, you have until 30 June 2025 to file a complaint with AFCA. If you were sold add-on insurance after 5 October 2021 before four days had passed since you bought a car, you are eligible to file an AFCA complaint with no deadline currently set. 

  • Aioi Nissay Dowa Insurance Company Australia (sells Toyota Insurance)
  • NM Insurance (underwrites motorcycle insurance for The Holland Insurance Company, AAI – part of Suncorp – and AIG Australia)
  • Eric Insurance (formerly AVEA Insurance)
  • LFI (insurer for Liberty Finance)
  • Sovereign Insurance
  • Virginia Surety
  • QBE Insurance
  • MTA Insurance (owned by Suncorp)
  • Swann Insurance
  • Allianz Insurance
  • National Warranty Company

How do I know if I bought add-on insurance? 

Check your car or motorcycle loan contract. It will indicate whether you paid for add-on insurance.

We're on your side

For more than 60 years, we've been making a difference for Australian consumers. In that time, we've never taken ads or sponsorship.

Instead we're funded by members who value expert reviews and independent product testing.

With no self-interest behind our advice, you don't just buy smarter, you get the answers that you need.

You know without hesitation what's safe for you and your family.

And you'll never be alone when something goes wrong or a business treats you unfairly.

Learn more about CHOICE membership today

We care about accuracy. See something that's not quite right in this article? Let us know or read more about fact-checking at CHOICE.

Stock images: Getty, unless otherwise stated.