Why we need insurance

In conversation with Jules Knox, Personal Financial Adviser at Evalesco we look at why we need insurance and how to make a claim.

There are no certainties in life, so it’s best that we prepare ourselves for any event or eventuality. As ominous as it may sound to the carefree optimists of the world, it’s important to give the future some thought, to avoid being blindsided by trauma, illness or even death.

Getting good insurance advice and optimum coverage is a sure-fire way of ensuring financial preparedness in case of any event. There are many ‘what ifs’ out there; just make sure you’re ready to combat them with the right insurance cover that will stand you in good stead if and when the time comes.

Insurance is as important as wealth creation and saving

Most people seek out a personal financial adviser to talk about how they can increase their wealth in relation to their financial or personal goals. And most often, the advice is based on maintaining a healthy equation between earning, spending and saving.

There are many people who haven’t given much thought to the ‘what ifs’ in life. What happens if you can no longer work. What if the income you are so reliant on stops, and you can’t fund your current lifestyle. What if you suffer a major illness and can’t work.

Most of us know someone first hand that’s had cancer, a heart attack or a stroke. And what about a worst-case scenario where the primary breadwinner dies. How are the spouse and children potentially going to get on financially without that regular income coming in.

Insurance gives you the financial protection you will so desperately need during unforeseen events. You should ensure that you’re in a position to continue living your life in spite of any eventuality.

My professional and personal experience with insurance companies

People in general are of the opinion that insurance companies don’t pay claims or go out of their way to avoid paying claims but my personal and professional experiences speak otherwise.

It’s important to see the positive side of insurance, because unfortunately, it’s only the bad news stories that makes the media. Insurance is there for clients when they need it. I can speak from personal experience and also with regard to my clients who have gone through the claims process and they have received the much-needed funds from their insurance policies when they needed it.

Earlier this year, I discovered that I had a melanoma. It was a bit of a fluke to have discovered this because I generally lead a fit, healthy and active life. I happened to take my son to the doctor and I decided to get my skin checked as well, which is when this was discovered.

After getting over the initial shock of the diagnosis and going through what I had to do from a medical point of view, I decided to look into my Trauma Insurance cover to confirm that my illness would be claim-worthy. As I was a financial professional, I knew that was an option, but the general population or even my clients don’t have much awareness about Trauma Insurance.

Trauma Insurance, also known as Critical Illness Insurance, is designed to cover critical illnesses. It is a lump sum type of cover. So you insure a sum that will give you the funds to cover medical costs if you suffer an event, as well as the living costs while you are recovering.

I knew I had the Trauma Insurance cover and that I probably would be eligible to make a claim based on what my pathology results were. My husband was also reflective of the general population and was sceptical about whether insurers would pay for issues like mine. But I assured him that this insurance existed for these types of events. So, I did make a claim and the process was really easy.

My experience with the insurance claim process

I took a 3-page form to my specialist and had him fill in the diagnosis as well as my pathology results. I had to collate other related paperwork, but all in all, I’d say it wouldn’t have exceeded 8 or 10 pages. Being a professional in a related field, I worked on the claims process myself. But if my clients had to make a claim, I would do that for them making it that much easier.

In my case, a few questions went back and forth, but having provided all the information that was asked for, the effort was absolutely minimal. The insurer came back to me within two weeks saying the claim had been approved. Two days later, I had the claim proceeds in my account, lending credence to the fact that insurance companies do pay claims.

Don’t underestimate the importance of seeking timely professional advice

Most people don’t take the time to read the product disclosure documents when they take out a policy. Though the definitions of the policy may be black and white, there may be a few fields that have to be interpreted and understood correctly. Financial advisers have the experience and the know-how to explain the policy, clear doubts and simplify the process. For instance, with cancer there are different stages which may make you eligible only to a partial payment as opposed to a full payment, depending on what is applicable to you. But in any case, if you have a health event, it’s always wiser to seek professional advice about whether or not you’re eligible for a claim.

I had a client who came in for a review recently and she just happened to mention that she recently had skin cancer removed. I started probing and asking more questions and realised she was eligible for a claim, now we have a claim in process for her. I can’t be sure whether every case will meet all the criteria but I know for sure that it’s definitely worth going through the process.

No-claim bonuses are another misconception. People deliberate about whether to make a claim or not, thinking that it may affect their premiums, when in reality that’s not the case. The worst that can happen after going through the claims process is that it doesn’t get paid because it did not meet the criteria. The silver lining to consider is that your claim didn’t materialise because your health issue turned out to be a minor one.

At the end of the day, it’s worth making those enquiries with a financial adviser to decide whether it’s worth putting in a claim or not.

Go to a licensed financial adviser to calculate your insurance needs accurately

You may think it’s easy to find answers to your insurance queries on Google but the information overload makes it impossible for the layman to sift through all the data that pops up on your screen. The added advantage of seeking financial advice from a professional is that when you go through the advice process, the calculation of your insurance needs will be done correctly. Instead of deciding to get some insurance without ascertaining the covers that you actually need and the amount for which you should ideally be covered, you will get advice on exactly what amount you should be insured for and the right insurance cover for you.

Direct insurance providers don’t provide the whole picture

It’s good that direct insurance providers are raising awareness because Australia is one of the most uninsured countries in the world. But direct insurance companies are not actually licensed to provide personal advice. They can give general advice, but at the end of the day it’s up to the consumer to determine what his or her needs are and how much insurance to apply for. Potentially, in that process, you may not structure the cover correctly. You may not know how to hold different insurance covers for different purposes, whether you should hold it in super or whether you should hold it in your own name and how each one impacts tax. If you go to a direct insurer they’re not going to be able to give you that advice.

The other word of caution is that direct insurers often tell you that you can apply over the phone and that they offer up to a million dollars of life cover without any medicals. If you hear an insurer offering life insurance cover with no medical details to be provided, then that’s probably a red flag. What this means is that when you do go to make a claim, they may ask for medical information and look back through your health history and then determine that you’re not eligible for a claim. So it’s a waste to pay good money for premiums over a number of years, thinking that your insurance is going to be there when you need it. If you haven’t been medically underwritten at the time of your application, there may be traps when you make a claim.

A financial adviser will help you through the underwriting process to make sure you get all the information upfront, subsequent to which the insurance company will accept you as a client, and you will have the certainty that the claim will be paid when the time comes.

We only recommend insurance companies that have a track record of paying claims

The types of insurers that we work with are in the business of accepting claims and it’s in their best interest to be able to pay those claims. We will not put our clients into policies where we think the insurers are not going to pay. So, there’s definitely motivation for the insurers that we work with to boast about their claims history. If we think they’ve got a really good track record of paying out those claims, then as advisers we will feel more confident about our clients having policies with those companies. There’s definitely a link between the claims history of insurance companies and the viability of their businesses, because it will help get new business in their books.

It’s never too late to protect yourself with insurance cover. But be smart about it, have a meeting with a financial adviser and make an informed decision about the types of insurance you need and the sum you should insure in relation to what you can afford.

For more information
If you would like more information about the right insurance for you then please talk to Jules at Evalesco on jules@evalesco.com.au

I have an amazing opportunity in my financial advisery role to make a difference to people’s lives by helping them to achieve what’s important to them.