In May, ANZ released its fifth Survey of Adult Financial Literacy in Australia and worryingly, only 33% of all respondents said they had life insurance. The report did note that this is likely to be an under-estimate as many respondents would have life insurance as part of their superannuation. It nevertheless indicates either a disinterest in or ignorance of the importance of protecting the assets that have been built up over time.
According to the survey, holders of life insurance were most likely to be males aged 35 to 59 years, particularly males in this age group who earned personal incomes of $80,000 or more per year (63%), who held a mortgage of $300,000 or more (68%) and who lived with a partner and dependent children (59%).
A similar percentage (35%) of those working full-time said they had income protection insurance, with those most likely to have insurance the same demographic as above.
Unaware of potential to refuse a claim
In the insurance world, a pre-existing condition is important because it may affect your life insurance cover. What is it? If you are currently or have ever been treated by a specialist for a medical condition, it is known as a pre-existing condition. In short, it’s a medical condition you had before taking out life insurance. Death caused by this condition may result in a claim being knocked back.
Very worryingly, the ANZ survey found that of those who did have insurance, only 42% of respondents were aware that a claim could be refused if the policyholder had not given accurate answers to questions relevant to the loss.
|As far as you are aware, can your insurance company refuse your claim because when you took out or renewed the policy you did not accurately answer some specific questions asked by the insurer that were relevant to the loss?||Yes
Source: ANZ Survey of Adult Financial Literacy in Australia, 2015
Companies differ on how they treat pre-existing conditions, such as how they define the condition if it has been successfully treated, resulting in no further ongoing tests or consultations. Some companies will exclude all pre-existing conditions from coverage, even though you may not have had treatment for the past 20 years. This is what’s known as a total pre-existing condition exclusion. Other companies will allow pre-existing conditions to be covered if the treatment and consultations with the doctor have stopped in the last 5 years, 2 years or even 6 months.
With such variations in terminology by insurers, it is in your best interests to understand how pre-existing medical conditions are handled by each insurance company. It’s also definitely in your best interests to declare any pre-existing conditions. After all, you have a duty of disclosure and it’s better to be honest now rather than have your family face unnecessary stress at claim time. Having a claim rejected because you failed to disclose a condition is a waste of money on your part and a hassle for your loved ones.