Page 43 - ETU Journal Autumn 2017

SLATER & GO?RDON > LIFE INSURANCE LIFE INSURANCE
DO YOU KNOW WHAT YOU ARE BUYING
Understanding terms like “retail” insurance cover and “non-advised” cover can mean the diference between getting a claim paid and Mbeing left high and dry.
ost of us have seen it while watching TV in the early morning or while lounging around
on the couch on a Sunday.
Pleasant-looking people on the screen talking about the value of
life insurance and a voiceover ofering fast approval of insurance applications after an over-the-phone questionnaire and no documentation. Alternatively, there may be an ofer to apply online in just minutes.
What the average consumer doesn’t realise is the signiicant risk that such insurance carries.
There are many ways in which a person might obtain life insurance. Most commonly, insurance policies for Death and TPD are held through
a superannuation fund (known as “group’ cover). You might approach an insurance broker or inancial advisor who signs you up for a policy after answering some questions about your health (known as “retail’ cover), or contact an insurer directly to arrange cover (“non-advised” cover). “Non-advised” cover is the type of cover ofered through Sunday afternoon TV advertising.
Particular problems arise in the area of non-advised cover. A recently released ASIC report found that
often consumers do not understand the extents or limits of the coverage at the time they buy the policy and
in some circumstances have been misled about the coverage. ASIC sets
its expectation for insurers to provide policy documents that are “clear and understandable”.
The report found that for non- advised cover, there is generally a “blanket” exclusion for pre-existing conditions (usually not the case with group policies). With retail policies, the onus is on the consumer to
notify the insurer of the pre-existing condition, and the insurer will then make a decision as to whether that condition is covered based on the underwriting guidelines. A particular case study used in the report gives the example of a person who received a sales call from a life insurer (non- advised cover) and told the life insurer about a medical condition that made them uninsurable. The sales representative assured the person that they were covered. The person followed up with another call to the insurer and was again advised that they were covered. Subsequently, a claim was made and was rejected on the basis that the person had a pre-existing medical condition.
A further disadvantage with non- advised cover is that it usually ofers limited beneits, such as Income Protection policies that provide for shorter beneit periods, or smaller than average value Total and Permanent Disability (TPD) cover.
You must be very careful when
an insurer asks questions about medical history. If you are blasé about answering these questions, or answer a question incorrectly, when you make a claim you may ind the insurer says your policy has been cancelled. n
www.etuvic.com.au
WHAT YOU NEED
TO KNOW.
Check what you can claim
If you think you have ‘non-advised’ cover, know what you can and cannot claim for, and how much you will be covered for if you need to make a claim. If you are unsure of what or how much you are covered for, contact your insurer and ask for a copy of your policy schedule and Product Disclosure Statement.
Look at your statements
Regularly check your super statements to see how much Death and TPD cover you have.
Are you underinsured?
Finally, if you think you don’t have enough cover or that you need better cover, you should raise this with an insurance advisor or accountant. Underinsurance is a chronic problem in today’s society, particularly given that average household debt in Australia
is now four times as much as it was
27 years ago. We must ensure that we have good cover, and that the cover will be enough to pay any outstanding debts and an income in a time of crisis.
THE ETU > SUMMER 2016
43