Insurance Condition for loan. (JUNK)

Discussion in 'Loans & Mortgage Brokers' started by leicachamp, 11th Dec, 2019.

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  1. leicachamp

    leicachamp Well-Known Member

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    Melb
    Hello Everyone.

    As you may have read, Westpac has been found guilty for selling junk insurance to Credit card holders.

    But do you know whether Banks have sold junk insurance for commerical loans?

    In my situation, I did a JV with a friend who did a land and construction loan for 1.6m. On the original letter of offer there was no insurance requirement, but at the last minute Westpac demanded that my partner take out a life insurance policy. At that time i thought it would be only a flat 1-2k expense. It ended up being 12k per annum fee!!!!

    Does this sound like junk policy? Note that personally i have done over 10 commercial loans myself via NAB and CBA and never been forced to buy life insurance.

    Thanks for any input
     
    Last edited: 11th Dec, 2019
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Junk insurance probably means something like insurance that is worthless. If the life insurance one that would pay up at death? I would imagine it would not be junk.

    Who was the beneficiary of the insurance policy? Life insurance isn't available to creditors of the deceased, but they probably want it paid to the other owner who they could recover the money from.

    I have never seen this requirement either.
     
  3. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    If a lender was to insist on XXX Brand life insurance its very different to a loan condition requiring the borrower be insured. There is also the concept of Third Line Forcing under consumer law and illegal non-independent financial advice here.

    It may be an action to explore with AFCA if you consider you were product dumped. You may need to initiate a complaint with Westpac and then escalate it if the outcome is not satisfactory.
     
  4. leicachamp

    leicachamp Well-Known Member

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    Location:
    Melb
    Thanks

    Will look into it further.
     
    Terry_w likes this.

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