Consumer NZ: Add-on car insurance ‘a total ripoff’ for buyers

Car buyers are being “hoodwinked” into paying hefty premiums for often unnecessary add-on insurance, Consumer NZ says.

Between 2018 and 2020, New Zealanders paid out about $442 million in premiums for add-on insurance at car yards. Only $128 million was paid out in claims.

Add-on insurance includes mechanical breakdown insurance (MBI), guaranteed asset protection (GAP), credit contract indemnity (CCI) and payment protection insurance (PPI).

These insurances are sold as protection in case the buyer is unable to pay off the loan, or if the car breaks down.

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Consumer NZ chief executive Jon Duffy​ said the policies had so many exclusions and conditions, it was easy for consumers to get “hoodwinked” into paying for a policy that provided very little protection.

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“Often MBI policies don’t provide much more cover than the Consumer Guarantees Act [CGA], so we’d recommend consumers really consider whether they need it,” he said.

“Under the CGA, if you buy a vehicle which isn’t of acceptable quality, the dealer is required to sort it out. Investing in a pre-purchase inspection and regular car servicing could be a better investment.”

CCI and PPI are designed to cover payments which can’t be made due to sickness, hospitalisation, accident, redundancy, bankruptcy or death.

However, these policies come with a long list of exclusions, including anxiety, stress and getting caught in a natural disaster.

Consumer NZ chief executive Jon Duffy says add-on insurance is a nice little earner for car dealers and insurers, but a rip-off for consumers.

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Consumer NZ chief executive Jon Duffy says add-on insurance is a nice little earner for car dealers and insurers, but a rip-off for

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