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The important difference between payment waivers and insurance

In March 2020, Taika borrowed $16,000 to buy a new family car. Alongside the loan, Taika purchased a health waiver that was intended to help him if he was unable to make his loan repayments due to sickness, hospitalisation, or terminal illness. If Taika made a successful claim, up to $125 per week would be waived from his loan repayments.

In late 2021 and early 2022, Taika was unable to work on four occasions due to sickness. In March 2022, he submitted health waiver claims to cover these periods. The lender accepted the claims. They confirmed they would waive three and a half weeks of loan repayments, totalling $437.50.

Taika then contacted the lender and asked them to pay him the $437.50. The lender refused, so Taika complained to FSCL.


Taika thought the lender should pay the $437.50 directly to him. He said he was struggling financially after being off work, and really needed the money.

The lender explained that the health waiver did not operate like a normal insurance policy that would pay out money. Instead, the benefit of making a successful claim was that the lender would waive the payments that Taika was otherwise required to make.

Although this was the normal position, Taika had already made three of the four payments that were now being waived. This was because three of the periods of sickness Taika was claiming for were in the past. This meant Taika’s loan account was in credit by $255.50 after the waiver had been applied. The lender agreed to transfer this to him, but Taika remained unhappy they would not release the full amount of his claim.


We reviewed the health waiver terms and conditions. These confirmed that the benefit of making a successful claim was that loan payments would be waived. This meant we could not say the lender should pay the full claim amount directly to Taika. Overall, we were satisfied the lender had correctly followed the waiver terms and had acted reasonably in transferring Taika the credit balance.


We recommended Taika discontinue his complaint. He did not respond, so we closed our file.

Insights for consumers It is important for consumers to understand the difference between payment waivers and insurance policies. A successful claim on a waiver will not generally result in any money being paid to a consumer, rather the waiver covers the loan payments by paying them directly to the lender.