Taking the time to get your insurance right is important, otherwise you may find that you don’t have the correct cover when you need it. The below points will give you some options to explore when it comes to your insurance cover.
EDUCATE YOURSELF ABOUT EACH INSURANCE TYPE
Understand what each type of insurance offers so you can get peace of mind that you have the right cover. Often, the fastest way to educate yourself about insurance types is to speak with a trusted insurance broker or financial planner. They can explain the differences between common insurance policies in plain English, free of any confusing jargon.
CONTACT ALL YOUR INSURANCE PROVIDERS
Insurance is only as good as your understanding of it. If you don't know the exact details of all your insurances, you're at risk of being over- or under-insured. Now might be a good time to contact all of your insurance providers and get the policy schedule for each type of cover. With this information, you will be better equipped to understand and compare what you have in place.
Understanding the terms and conditions of insurance can be tricky, so before you consider cancelling or consolidating any of your policies it might be a good idea to seek advice from a financial or risk adviser.
You may be eligible for a discount if you have more than one insurance policy with any one insurer. It's also a good idea to contact your super fund to see if you have default insurances as part of your superannuation. Keep in mind that this type of insurance is 'Group Cover'. It's not underwritten and may not be tailored to your exact needs.
Finally, it may also be a good idea to speak with your partner and review your policies together.
CONDUCT AN ANNUAL AUDIT OF ALL YOUR INSURANCES
Changes in your circumstances can affect the levels of insurance cover you require. A lot can happen in a year, so make time to conduct an audit of your insurances every 12 months. For example, you may have had another child, your salary may have changed, or you may have changes in your debt obligations. Whenever there is a significant change in your circumstances, it's a good idea to review your cover.
READ THE FINE PRINT ON YOUR INSURANCE POLICIES
Often insurance that is sold through direct marketing, such as TV advertisements, is not underwritten. This means that the policy will be underwritten when it comes to claim time, rather than before the policy has commenced.
Underwritten policies go through an assessment process before they come into effect. This process may include things like medicals and occupational assessments. The terms and conditions of the policy are agreed upon before the policy commences and do not change throughout the life of the policy.
Non-underwritten insurance like the types advertised on TV only conduct a basic assessment before the policy begins, such as your smoker status and age. All other medical questions will be asked when you go to claim. This may mean that you are unable to claim or that your claim will be rejected.
CONSIDER CONSOLIDATING YOUR INSURANCE
If you bundle some of your insurance policies together, you may be eligible for a discount. For example, see if you can get a discount if you bundle your compulsory third-party insurance with your other car insurance or home insurance. This may be beneficial, although not always - sometimes the best option is to go with two different insurers.
It's also important to be aware that with some types of insurance you cannot claim on both policies at the same time. For example, you cannot claim on two income protection insurances at the same time.
REVIEW YOUR SUPERANNUATION INSURANCE
Most people have some insurance as part of their retail or industry super fund. The insurance included in these funds is often 'Group Cover' which means it's not tailored to your requirements.
Contact your super fund and ask what is and is not covered so you can make a more informed decision relating to your insurances moving forward.
If you require more cover than the default offering, you will need to apply and in most cases go through a medical and occupational underwriting assessment.
Also remember to ask your super fund what premiums you are paying, as they may be eroding your retirement funds.
CONSIDER INCOME PROTECTION
Income protection provides up to 75% of your income should you not be able to work due to accident or illness. Income insurance usually has a waiting period of 30 days, 60 days, 90 days or 24 months. The longer the waiting period, the cheaper your premiums may be. When assessing a waiting period that may be right for you, consider how much sick leave you have accrued and whether this can fill the gap during the waiting period.
DON’T NEGLECT TO PLAN FOR UNCOMFORTABLE SCENARIOS
Many people consider insuring the main income earner. However, if a partner or child falls ill this can have huge financial impacts. Consider exploring options for life insurance for both partners, as well as child trauma insurance.
REGULARLY REVIEW YOUR INSURANCES AND SEEK PROFESSIONAL ADVICE
Check if you need more, less or the same level of cover as when you last reviewed your insurances. Weigh up the difference between having a high premium and low excess and vice versa. You may be able to save on your premium by increasing your excess.
If you're unsure how much cover you require, seek professional advice from a financial planner or insurance specialist.
UNDERSTAND YOUR WAIT PERIODS
Some insurances have pre-determined wait periods before claims will be paid out. This may be anything from one month up to several years. It's important to discuss the wait periods with your insurance provider and understand how these actually work in practice. For example, an insurance policy with a one-month wait period may not pay the beneficiary until the end of the second month. This can add significant financial strain to an already difficult situation if it catches you by surprise.
TALK TO A FINANCIAL ADVISER ABOUT INSURANCE AND SUPER
Understanding the benefits and risks of having insurance inside your superannuation can be confusing. Some types of insurance are tax deductible inside of superannuation but not outside of superannuation. For example, insurance such as income protection is fully tax deductible, so many people hold it in their personal names (outside super). Another thing to consider is that holding all insurances inside super may be good for the household budget but may significantly diminish your superannuation. It's best to talk to a financial adviser about how to best structure your insurance given your budget and risk tolerance.
LEARN THE BASICS ABOUT INCOME PROTECTION AND TRAUMA INSURANCE
There's much confusion about what these products are and how they work. It's important to understand the basics so you can explore whether you have adequate cover.
Trauma Insurance is a lump sum payment received when a critical medical event occurs, such as a heart attack, stroke or cancer. The money is often used to cover the associated medical expenses.
Income Protection Insurance provides up to 75% of your income should you not be able to work due to accident or illness.
REVIEW YOUR INCOME PROTECTION INSURANCE
With most Income Protection Insurance, the shorter the wait time, the more expensive the premium. Therefore, if you have a large amount of sick leave or annual leave, you may be able to use this as part of your risk mitigation strategy. This means you may be able to sustain a longer wait period, which can potentially reduce the cost of your insurance premium.
UNDERSTAND THAT NOT ALL INSURANCES ARE EQUAL
Cheap cover is often cheap for a reason. Within the terms and conditions, there may be many exclusions. What's more, direct marketed insurance is not usually underwritten at the time of application. This means that investigations take place at claim time rather than before the policy begins, which could compromise your ability to make a claim in the future.
CONSIDER ENGAGING A FINANCIAL ADVISER TO HELP WITH DECLINED CLAIMS
Even when the best policies are in place, insurers can find reasons to decline a claim. In this event, it can be useful to engage a financial adviser to assist you with processing your claim. They can help you tackle any challenges that may arise.
Do you have a financial adviser who has experience in claim disputes? If you need to challenge a refused claim, the legal entities that offer to help may take up to 50% of your payout when you are successful. In most cases, a financial adviser can serve as your advocate at little to no cost to you.
THINK BEFORE YOU CANCEL ANY INSURANCE
People often cancel insurance if they feel they cannot afford it or if they haven't seen any benefit yet. However, statistically, people cancel insurance three years before the average age they are most likely to make a claim. If you are considering cancelling your insurance, it may be better to arrange a review with a specialist as often some cover is better than no cover at all.
A financial adviser can help you explore different structures such as stepped and level premiums and the risks and rewards of having policies inside or outside super. A financial adviser will also have an understanding of different insurance specialisations. You may have more options available to you than you think, such as extending wait times, restructuring policies, or reducing benefit periods.