Many policy holders are worried about what their cover will provide if they have to make a claim.
Some concerns are related to the thought that claims could result in favour of the insurer due to complex legal jargon, unfair exemption claims and lack of transparency.
If you’re wondering whether your personal insurance is worth it, the following questions may help to understand your policy.
1. Are you paying for multiple life insurance policies?
Many people ask the question if the coverage they are paying for over multiple life insurance policies are truly justified.
Having additional coverage and security is certainly not a bad thing. Some clients may wish to give themselves an extra level of protection which is not offered by on their current policy in order to provide more comprehensive coverage.
However, it is important that you take the time to understand the life product you bought and review your personal needs against the coverage you already have so as to avoid being over-insured, getting cover you cannot afford, duplicate cover or a policy that is not right for you.
2. Do your premium costs align with your cover?
A great care is needed when it comes to insurance, as it is not a product that should be bought solely on price. Some of the important aspect of a policy can be policy inclusions, definition of claimable events and benefits available. Understanding those concepts can sometimes be difficult for clients to comprehend as the initial reaction is to go for the lowest premiums.
3. What is covered?
Make sure to analyse the coverage of each type of insurance before committing or before its renewal.
You should assess aspects including the events or illnesses covered, the level of cover, the ongoing cost, how medical history might affect the policy and any exclusions. Thus, requesting the product disclosure statement and taking time to evaluate the product is key.
4. What is excluded?
Beware of what benefits are excluded and why. The broader the policy the more exclusions could factor in providing final terms of the policy. In the event of a claim, not understanding exclusions could lead to delays and frustration.
5. Is there a risk loading?
Risk loadings are what insurers use to determine how risky you are to insure. Members considered higher risk are being charged higher premiums.
Therefore, it is important for you to check your risk loading as you could automatically be classified as a smoker or blue-collar, unless specific information confirming the contrary is received.
6. How much insurance do you need?
A typical benchmark to work out how much cover a family would need is to estimate the mortgage and other debts, child care, education and living expenses. Then estimate what support a family might be able to provide from superannuation, shares, savings and existing insurance policies.
We provide a comprehensive financial protection service to help calculate the right amount of insurance our clients need.
7. Insurance default schemes, do they meet your needs?
Super funds provide life insurance to members on a default opt-out basis. Surprisingly, many people are unaware that they hold insurance through their super.
It is necessary to evaluate if the cover provided is tailored to your needs. You can either be over-insured (especially young people with no dependents) or under-insured.
There are a lot of rules and definitions to be aware of, in terms of what the policies do and do not cover and the cost implications of your plan. Take your time and review your situation and your policies as it can help you to save money in the long run.
Source:
[1] Finder (n.d.), Multiple life insurance policies, https://www.finder.com.au/multiple-life-insurance
[2] The Australian Financial Review (2018), Ten questions that could save your life (insurance), https://www.afr.com/personal-finance/ten-questions-that-could-save-your-life-insurance-20180919-h15krf
