Revelations before the commissionÂ showÂ insurersÂ cannot be taken at their word and consumers need to be on their guard.
A major take-home from evidence before the commission is that consumers need to be particularlyÂ careful when buying life insurance directly.
Policies sold directly tend to have lots of exclusions, because those selling directly don’t what to ask too many questions, as it makes the sale harder to close.
Insurance sold or bought directly can more often than not be junk insurance. That’s particularly with accidental death insuranceÂ where the commission heard most claims are denied.Â
One of the largestÂ super funds, the not-for-profit REST fund, which covers those working in the retail sector, came under examination by the commission. And it isÂ fair to say it came through relatively unscathed.
There were no sharp practices identified, but the fund could better communicate withÂ members as to how the the life insurance coverage continuanceÂ operates after a member leaves their job and there is no more superannuation being paid into the fund.
Many super funds offer automatic acceptance on life insurance, at least up to a certain level of “default” cover, without the need to provide medical history or undergo a medical exam.
On the evidence before the commission, life insurance accessed through not-for-profit super funds looks to be one of the more reliable ways to access life insurance.
But for those with complex circumstances, such as small business owners or those with complex family arrangements, where a more tailored policy is needed,Â the advice of a qualified adviser can be valuable.
However,Â even withÂ life insurance provided through super funds there are some areas of differences in coverage.
One of biggest is with the definition of total and permanent disability.
A payout can depend on whether the disability stops you from doing yourÂ “own” or “any” occupation.
The best policy definitions say the member is covered by total and permanent disability if they cannot work in their own profession.
Writes about personal finance for Fairfax Media, Sydney, Australia.
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