Do you REALLY have insurance?

Many Australian’s believe they have insurance protection simply because it’s a line item in their super fund statement, or are part of an employee group plan, or they may have taken out directly online or over the phone. But many don’t realise, this type of insurance is not a guaranteed policy, rather, it is only an indication of cover – and the difference between the two is significant!

If you have any insurance where you have not provided the insurer with your medical history, lifestyle information and/or been asked to undergo a medical assessment, you have actually only been issued with indicative cover.

Let me put it another way, say you see on a statement you have $500,000 of life insurance, yet you never provided the following information to the insurer:
  • Smoker status
  • Height
  • Weight
  • Personal medical history
  • Family medical history
  • Current health
  • Proof of income
  • Alcohol consumption
  • Medications
  • Pastime/hazardous activities

Q) Why would an insurer agree to pay you half a million dollars, without knowing anything about you? The answer is, they didn’t.

This is shocking news to most people that think they have insurance in place, but then realise that they never actually told their insurer anything about them.

So what does the insurer do if they’ve issued you with a policy without knowing anything about you? Simple, they ask you at claim time! And they then determine whether, had they known more about you at the time the policy commenced, would they have accepted you as a risk? If the answer is no, they may decline the claim. And by the way, they don’t refund the premiums they have been collecting from you for years.

Not only may you not be as protected as you think, often these policies are more expensive for the simple fact that these types of policies attract the ‘unhealthy lives’, because these people tend to avoid having to provide medical history information for fear of their application being rejected. If the insured group is ‘unhealthy’, this leads to more claims, the direct result of an insurer paying more claims is they increase the premiums on everyone to cover the cost of claims.

This is why insurance through direct channels, through superannuation or through group plans is often more expensive than insurance where full disclosure is required, and the likelihood of a successful claim through those channels is significantly lower.

The West Australian published a report on Saturday 15th October 2016 where an ASIC investigation found that these policies has a denied claim rate of 29%. This simply means that one third of people who thought they were protected, actually weren’t!

Make sure you understand exactly what insurance policy you have, and if you have any doubt, please seek professional help, don’t be one of the 30% who is not protected.
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