The devil is in the detail...

When it comes to personal insurance the devil, as they say, is in the detail. Forgetting to complete a section of the application form, ticking the wrong box, misquoting your income or not bothering to mention a long-ago medical condition are just some of the actions that could result in a claim being denied down the track.

In the 2012/13 financial year, the Financial Ombudsman Service (FOS) received 1,268 life insurance-related disputes – an increase of 16% from the previous year.  The majority of complaints related to claims being denied or a decision being delayed.

Broadly, there are three common traps that consumers fall into when applying for personal insurance.

1. Non-disclosure. Whether you are filling out a paper form, applying online or via the telephone, it’s vital that you give the insurer all the information that they ask for. This includes your full medical history including any past medical issues. They may require your family medical history as well (in relation to hereditary risks). It also includes your full job description and a list of your hobbies and sporting involvements.  Be comprehensive – if your insurer believes, at a future date, that you did not fully disclose all relevant information at the time of application, they may refuse to pay an insurance claim or cancel the policy.

2. Not reading the policy document. Insurance policies can be long and dry documents, with a number of terms that are difficult to understand. It’s important to spend the time reading the policy document so that you are certain of the cover that you have.

3.Not properly considering what cover you need. Choosing a personal insurance policy that suits your needs can be a deceptively complex process. When it comes to insurance, the cliché that you just don’t know what you don’t know quite often holds true. As an example, these are some of the total and permanent disability (TPD) related questions you may need to consider when evaluating policies:

  • Does the TPD insurance pay out if you are unable to do your “own occupation” or do you have to be unable to perform “any occupation”?
  • Should you have a buy-back option on your TPD or Trauma cover?
  • The specific definition of “total and permanent disability” can vary from company to company – how does your insurer define it?
  • Should you apply for a stepped or level premium? What will work out better in the long run?

The message? While personal insurance is a “must have” product, it’s also a “must get it right” process. Getting professional advice can greatly assist you; at the very least, spend some time working out your requirements before signing on the dotted line.

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