Will Your Insurance Policy Pay Out When You Need It?

What's the most important aspect of an insurance Policy?

Will it pay out when you need it?

An example is, it's easy to do a quick online application and get the cover, but it might not be that easy to get paid.

Financial planners have a strong focus on protecting you from risks with personal insurance. Sometimes we hear people say that insurance is a waste of time. It won’t pay out anyway, so it is a huge waste of money. Well here is what you need to know about why some policies don’t pay:

You had the wrong type of cover. The classic example of this one is the Total and Permanent Disability (TPD) Cover definitions that are available. People think that if they have TPD cover it is always the same. However some pays if you can’t ever work in your “own” occupation (usually held outside of superannuation). Some only pays if you can’t work in “any” occupation (commonly found inside of superannuation). Some cover has better definitions of TPD, and some cover (usually automatically accepted and held inside superannuation) is unlikely to pay almost anyone.

Financial Advisers provide advice on all types of personal insurance and should discuss with you the reason and risks with each type of cover, and the cost/benefit relationship.

Your policy was dependent on you maintaining your employment with the employer that enrolled you in your super fund. When you left your ex-employer didn’t bother to tell the fund. So you think you still have cover but you actually don’t. Quite a shock for you and/or your family when you try to claim.

Your policy was dependent on you maintaining a minimum balance and ongoing contributions to the fund. Again, you didn’t know until you tried to claim (assuming you hadn’t read the fine print).

Your Financial Adviser should be providing a policy that isn’t dependent on one employer or occupation, and should remain in force during a career break or a change of profession. They should provide a policy that isn’t cancelled if you don’t contribute to the fund. They should also provide you with reviews to ensure you can continue to pay premiums without hardship.

Your policy is underwritten at claim time, and any pre-existing conditions are excluded. So when you can’t work because of depression, but you had been on anti-depressants years ago when you joined the plan (but they didn’t ask you), you now can’t claim your income protection benefit.

The policies a financial adviser recommends are underwritten at the time of application not at claim. This means that as long as you fully disclose your medical and health history when you apply, there should be no way of declining a valid claim. If they do apply an exclusion for a condition based on a pre-existing medical condition at least you will know in advance.

Your policy is cancellable. You have salary continuance cover in your group super fund, and you make a claim when you have a stroke. Once you are back at work they cancel your cover and you have no option if you get sick again, even if it is a different issue.

The policies a financial adviser recommends are usually non-cancellable. Even if your health deteriorates or you change your job, the insurer can’t change their mind on whether to cover you if you continue to pay your premiums.

Your terms and conditions are changed after your policy is put into place. This frequently happens in group super funds since the owner of the policy is the Trustee of the fund, and not you. They can change the insurer and terms of the policy at their discretion

The policies a financial adviser recommends are much more likely to pay out at claim time. The terms and conditions are known and locked in when you apply. An insurer can improve the benefits you were originally offered, but cannot downgrade them.

The insurance company just doesn’t want to pay you out.They make things so difficult for you at claim time that you end up deciding you weren’t eligible for a claim, or the claim is not worth the fight. We unfortunately see this a lot.

A financial adviser will be there at claim time to help you or your family get your funds when you are not able to fight for yourself because you are sick, or injured, or have passed away. The adviser’s role is to be your advocate. To make it as easy as possible and to ensure you get anything you are entitled to.

So how do you prevent non-payment?

Quite simple really. Get advice from someone who is doing their utmost to protect you and your family from financial disaster in the event of serious illness, injury or premature death. Don’t take advice from the television advertisements, or people with interests that aren’t first and foremost protecting you.

Financial Advisers have to do research on the products they offer you. They need to offer you the best option for your situation. The policies a financial adviser recommends should have terms and conditions that match your needs.

A financial adviser will ask a lot of questions to help you get the cover whilst you are healthy, for those times when you may not be in the future. Based on their experience they will strongly encourage you to apply for cover that is adequate for the future. There is no point waiting until you are sick or injured to check your cover, it will be too late.