Insurance

A Quick Guide to Insurance Options

Insurance Marketed via Telephone & Television Commercials - Be Warned!

Cover through Industry Superannuation Funds

You might think that you're covered - think again!

The Risk Store Industry Stats 2010 

 

 

Insurance Marketed via Telephone & Television Commercials - Be Warned! 

 By Sally Jones of DMG Financial Planning

We have all seen those television commercials whereby an insurance company (normally who you've never heard of) tells you that "you too can be covered for as little as $1 per day".  Sounds too good to be true?  It probably is.  Some problems with these types of polices are:

  • Premiums start off cheap, and become very expensive with age (and as you statistically become more likely to claim);
  • Definitions can be convoluted and very hard to meet when it comes to claim time;
  • They are often "accident only" meaning that you are not covered for any illness or injury that is not associated with an accident (i.e. you would not be covered for Cancer, Heart Attack, Stroke and many other illnesses and diseases);
  • Pre-existing illnesses and injuries are automatically excluded - but you're often not told this until it comes to claim time and you are unsuccessful.  This is after many years of paying premiums;
  • You are often underwritten upon claim (not upon application like most of the insurance companies we use), reducing your chances of successful claim;
  • A warning on funeral plans.  You may already be covered (and paying for this) through your life insurance as many polices pay an amount in advance (before the claim is processed) to cover funeral costs.  This is usually $10,000 to $15,000 which is paid to a nominated bank account within 1-2 business days.   Check your individual polices for this feature.

 

 

Cover through Industry Superannuation Funds

By Sally Jones of DMG Financial Planning

Many Industry Funds offer insurance as a standard feature of a superannuation account.  This can be useful, but it can also give you a false sense of security that you have sufficient cover.  Often this is the case.

Cover may be low cost and there's a reason why:

  • Insurance is cost effective at low levels, and can be expensive at the appropriate levels of cover;
  • Wide age brackets are often grouped together for premium costing meaning that young healthy members subsidise the cost for older members (who are a higher clam risk);   
  • There are often longer waiting periods associated with TPD claims; and
  • TPD definitions are harder to meet.  This could result in long delays in claims or not being able to claim at all.
  •  Very little additional service and support provided;
  • Income protection is often for a very limited period.  We like to ensure that policies run until age 65 and not merely a 2 or 5 year period.

 Also a word of warning.  This cover is often applied without you asking for it and charges commence.  You then must apply and complete documents to have it removed.  In one case a 17 year old casual employee, who was still at school, was charged for income protection insurance, death and Total & Permanent Disability cover.  

You might think that you're covered - think again!     

By Sally Jones of DMG Financial Planning

"Workers' Compensation will cover me"

Workers' Compensation will only cover you for accidents or injuries that occur during work hours or for an illness that is a direct result of your employment (if you are self employed you may not even have Workers' Compensation cover).

Even if your injury is covered by Workers' Compensation, benefits are capped under the different state regulations, in terms of both the amounts of weekly benefit and length of time they are payable for.  For many people, the benefit s payable under Workers Compensation will be well short of their normal weekly income.

"I've got Private Health insurance"

Private Health insurance is great when it comes to paying medical bills, but what about mortgage repayments and other costs of living?

"I already have insurance in my super"

Most superannuation plans offer some insurance cover.  But it may only be cover for death and total and permanent disability.  And who has decided the amount of cover you need?  Usually the super fund trustee who knows nothing about your personal and financial situation.  Also,  if you need financial assistance while you're recovering from an illness or injury, you'll need to count on more than your super.

"Social Security will be there if I'm too sick to work"

If you are too sick to work because of sickness or illness, remember that Centrelink benefits are asset and means tested.  So depending on your own personal assets and other income, funding your lifestyle may fall short.  Even if you are successful in meeting their strict eligibility requirements of the Sickness Allowance or Disability Support Pension, you can only receive up to a maximum of $730 per fortnight. 

 

References

  • "What would happen if your income stopped?" - Zurich Financial Services
  • "Claims paid by Asteron in 2009" - Asteron
  • "Holding Insurance Inside or Outside Super - Taxation Issues", RiskInfo Magazine, March 2001
  • "Little Book of Advice Concepts" - CommInsure
 

 

 

Close