Millions of Australians could be repaid hundreds of thousands of dollars by the big banks for junk insurance products – but there’s a catch

Millions of Aussies have been urged to check whether they are eligible to receive hundreds of thousands of dollars in payouts from the big banks for taking out ‘junk’ insurance products.

Australia’s largest banks were ordered to pay $10billion to customers for selling worthless insurance products after findings made by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in 2019.  

The Royal Commission found Aussies were duped into purchasing policies such as loan protection and gap insurance.

Bank employees earned a bonus if they sold the insurance products, with dozens of Australians agreeing to pay and others unaware of the extra cost.

Less well known is that customers for these products will have to apply for the refund themselves. 

The major banks have paid out around $40million to affected consumers so far.

Customers will also receive compensatory interest payments to account for inflation. 

One Aussie couple received a massive $110,000 after investigations were conducted into their mortgage protection. 

Aussies have been urged to check whether are eligible for a refund that could be worth hundreds of thousands of dollars after customers were sold ‘junk’ insurance (stock image)

Teenah and her husband Troy received the huge sum after they spent years paying off their home loan only to realise they were not reducing their balance.

The pair fought for three years to cancel the dodgy insurance and it has paid off, with their loan repayments set to drop each week. 

‘I was in disbelief because it can feel like the little people can’t win against the bank,’ Teenah told 7 News. 

‘We’ve put the money straight on the mortgage so we’ll own our house in a year or two, rather than 10 or more.’ 

Michael James took out a loan in 2007 to pay for a house he bought. 

Mr James said at the time he didn’t know the insurance he purchased was worthless and lodged a claim to get his money back through insurance refund specialists Claimo. 

‘I just put the paperwork in and they came back and said…”NAB has said [you will receive] $12,196″,’ he said. 

Managing Director of Claimo Nathan Mortlock said most customers were not told that the extra insurance they purchased was optional. 

‘What happened was that the value of the insurance on the loan was bundled into the total amount of the loan, often at the time of signing, substantially increasing the payable interest,’ he said. 

‘They (the banks) can make it quite hard in terms of the investigations they’re doing,’ Mr Mortlock said. 

Daily Mail has contacted Claimo and the Australian Financial Complaints Authority for further comment. 

Commonwealth Bank, NAB, ANZ and Westpac have also been contacted for comment. 

Claimo has helped Aussies claim $5million in junk insurance refunds and the company has helped over 1,600 customers seek refunds from the banks.  

Customers who feel they are eligible for a repayment after taking out junk insurance will have to apply for the refund themselves (stock image)

Junk insurance is often sold alongside financial products such as credit cards and loans. 

These policies provide an assurance that the policy will protect their assets, however they actually provide little to no coverage.