What you need to know about credit-related insurance, repayment waivers and extended warranties, and how they can protect you in the event of unforeseen circumstances.

Extra protection for an added cost

When you take out a loan or buy products on credit, you may be asked to take out credit-related insurance, an extended warranty or a repayment waiver. Sometimes a lender won’t provide credit unless you do, but they can’t require you to.

Insurance or a repayment waiver may not be necessary if you already have sufficient life cover or contents insurance. Check the eligibility criteria, as you may not even be able to claim in the event of an unforeseen circumstance. For example, you may have to be working a minimum number of hours per week to be eligible if you lose your job.


Credit-related insurance is optional insurance that you can buy to insure any secured items under a credit contract and your ability to repay your loan if you have an injury, sickness, redundancy or other unexpected event.

Repayment waivers

A repayment waiver is an agreement between the debtor and the lender in which the lender, for an extra payment, agrees to waive any amount due in the event of your sickness, injury, unemployment or death.

Extended warranties

An extended warranty is an agreement between you and the lender in which the lender agrees to repair or replace defective products outside the normal warranty period.

See also:

Know your rights

With credit-related insurance, repayment waivers or extended warranties under the Credit Contracts and Consumer Finance Act (CCCFA), a lender must:

  • not be unreasonable about the terms on which you take out the insurance
  • disclose the terms of the credit-related insurance contract before it is arranged
  • if they arranged the insurance, provide a proportionate rebate of the insurance if you repay the contract’s full unpaid balance.

An unreasonable requirement is one that is not reasonably necessary for protecting your or the lender’s interests.

Lenders must make reasonable enquiries before you agree to a credit-related
insurance contract. They need to be satisfied that the insurance will meet your requirements and also that you will be able to make the payments without suffering substantial hardship.

Check the terms of any credit-related insurance carefully, including the cost, duration and eligibility criteria for claims, before you sign

Lenders must also help you to make an informed decision about whether to enter into the contract.

Read about the Responsible Lending Code to find out more.

If you don’t agree to take out any form of credit-related insurance but you are still charged for it, this may be in breach of the Fair Trading Act. It is illegal to make you take out this insurance. Lenders may not make false or misleading representations about your agreement to acquire products or services. In this case you should ask the lender to cancel the credit-related insurance and you should receive a full refund.

If you pay back your loan debt early and you have credit insurance, the lender must refund you the unused portion of the insurance premium. This can be deducted from the final settlement amount to pay off your debt.

A refund doesn’t apply to extended warranties or repayment waivers.

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Contact the bank or lender first

If you have concerns about your bank’s lending decisions or are in financial difficulty, you should contact your bank first. If your concerns are not resolved to your satisfaction within two months, you can then contact the Financial Dispute Resolution Scheme that your lender belongs to.

Next steps

If you are unable to resolve your issue directly with the bank or lender, contact the Financial Dispute Resolution Scheme that your lender belongs to. You can find the scheme details in the Financial Service Providers Register.

Financial Service Providers Register(external link) — New Zealand Companies Office

The Disputes Tribunal or District Court may be your next step.

Need more help?

Contact us for more guidance.

The Insolvency and Trustee Service(external link) and Federation of Family Budgeting Services(external link) may also be able to help if you are in financial difficulty.

Common situation

Credit-related insurance

Gregg is getting a small loan to buy a motorbike. The finance company insists he takes out credit-related insurance if he wants a loan from them. Gregg is currently unemployed so he doesn’t need this insurance, nor can he afford the extra premiums. Gregg can go back to the finance company and cancel this insurance and see if they will accept the loan anyway, or get a loan elsewhere.

Consumer credit loan

A wife was left with the family’s joint debts after her husband went bankrupt. Their financial adviser forgot to remind her that her husband had loan protection insurance. The wife made a complaint that was unresolved using the adviser’s internal complaints process. She then made a complaint to their independent disputes scheme, Financial Services Complaints Ltd. The issue was resolved after the lender offered a full refund of the premiums on the credit loan insurance.