Thousands of Australians wrongly think they are adequately covered by insurance held inside their superannuation funds, or those bought directly from an insurer. Usually via TV advertisement or online, known as direct marketing.

An article in The Age newspaper on Wednesday, February 21, titled ‘Protect yourself – make sure your insurance covers you’, highlighted the pitfalls of these policies, which only become known at the most crucial time – claim time.

Although these policies can seem hassle-free to put in place, given the (usually) very limited disclosures required around lifestyle or medical history, and the ability to obtain cover without any blood tests etc. (known as deferred underwriting). In many cases, this can be problematic.

Deferred underwriting means the assessment of the insured’s eligibility for cover (in terms of health, pastimes and financial entitlement) is done at claim time, rather than on application. This essentially means, there is no certainty of a claim actually being paid.

As a result, these types of policies have a significantly higher rate of denial at claim time when compared with policies taken out under the advice of a risk professional.

There is nothing worse than thinking that one is fully insured, only to find the policy doesn’t work at claim time. For the insured and their family, the right advice may be the difference between long-term financial security and severe financial distress in the case of death or serious health event.

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Please note that the above is provided as general advice and has not taken your personal or financial circumstances into consideration. If you would like more tailored advice, please contact us today. One of our friendly advisers would be delighted to speak with you.