Life insurance, including income protection and trauma insurance, is difficult.
It can be difficult working out what you should insure, for how much and what it should cost to insure it. It’s difficult to part with hard earned cash on the promise of a future payment, which you’re suspicious of ever receiving because insurers always try to get out of paying claims. Don’t they?
It also takes facing into our own personal vulnerability and mortality. No one likes talking about the chances and consequences of getting sick or dying prematurely.
We talk about income protection, trauma insurance, life insurance and total and permanent disability cover as your Personal Protection Package. Our clients implement personal protection packages for many reasons including to protect their loved ones, to protect their financial aspirations and to make sure they can continue to pay the bills.
A personal protection package is usually a grudge purchase. You grudgingly pay the premium hoping you’ll never have to claim on the policy.
And then you see front page news of life insurance scandals like we’re currently seeing at CommInsure, the insurance arm of the Commonwealth Bank. It doesn’t make you feel any better about paying those premiums, does it?
Did you know that for the last couple of years the Australian life insurance industry has paid out more than $5 Billion a year in claims?
Did you know that in 2014 AIA, one of Australia’s leading insurers, paid out 92.9% of the claims it received? It resulted in $900 Million in payments for the year, from AIA alone. And, many other companies have a similar rates of payment.
There is a big chance that most, if not all, of the recipients of the $5 Billion dollars of payments paid their premiums begrudgingly too.
This is my 20th year of involvement with the Australian life insurance industry. I spent 2 years working for a life insurance company and the other 18 years providing financial advice to clients.
I know the statistics and I also know the reality. Many real life stories of lives changed as a result of receiving a payment for their income protection or trauma insurance. I also know, first hand, that receiving a life insurance payout on the death of a loved one doesn’t stop you grieving but it means you can focus on picking up the pieces and not on worrying about money.
So, what can you do to increase the likelihood that your personal protection package will end up with you receiving a benefit payment in the event that something goes wrong?
Get good advice.
Did you know that none of the claimants in the current CommInsure story had an adviser involved with their policies or the claims?
Each adviser will do things slightly differently, so it’s not fair for me to generalise and say what your adviser will do. I can say with confidence that working with a good adviser will be to your benefit.
Here is a list of the things that we do for our clients to maximise the likelihood that, in need, they will receive the right payout from the insurance company:
Understand what’s important to our client, their aspirations and their current position.
This helps us to answer the questions such as:
What to insure?
How much to insure?
How is the insurance structured?
How much can they afford to pay for insurance?
Understand the product solutions that are available.
Which types of insurance are relevant?
Which companies could meet the needs?
Understand the policies in detail.
What are the specific conditions that may trigger a claim?
How do the definitions of the various policies available compare?
What are the key policy points based on the unique requirements of this client?
Educate our clients on the key aspects of their personal protection plan, so they are empowered to make smart decisions for themselves.
Help with all the paperwork, help answer any questions the insurance company has, and help secure the best personal protection package
We represent our clients to get the best outcome for them with the insurer.
Run regular reviews, to ensure the personal protection package remains relevant through life’s changes
We manage any Claims with the insurer.
This is where the rubber really hits the road. After all, the reason you are paying your premiums, in the first place, to be able to make a claim if something goes wrong. The last thing a client wants to be doing when they are sick, injured or dealing with the death of a loved one is to converse with an insurance company. That is our role.
The managing of Claims is one of the key issues that were identified in the current CommInsure story. The customers, lacked having a “champion” for their cause. A professional to question the insurer or their assessment, and make appeals on their behalf.
After declining a significant number of claims, CommInsure have since admitted that their definition of a heart attack was outdated and they should’ve paid those claims;
the claimants bought the policies directly, without advice (no professional company worked for them on their behalf; and the customers did not have experience with insurance or medical related matters;
There are no guarantees in life. Good advice does not guarantee a payment. However, it certainly can help.
Don’t let the bad news stories, the only ones that sell newspapers, distract you from the importance of your own personal protection package. We hope you never have to claim but if you do, make sure you have the best chance of being paid.