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Diabolic Situation When Your Insurance Won't Pay

Many of us believe that because we have an industry superannuation that includes insurance, that we will be covered should anything untoward happen. But in many cases, this very basic cover is insufficient in terms of quality and quantity. Principal Adviser of Heart Financial Advisers Stu Varidel shares a cautionary tale.

I have always been a very strong advocate for everyone to hold their own insurance whether it be inside or outside of super and always avoid industry super fund insurance at all cost.

Recently, I came across a situation that is particuarly noteworthy: I recall the situation as follows: An adviser met with a new potential client and his wife a number of months earlier and reviewed their situation. The adviser had provided advice and put in place and made a few changes, including, putting in place additional insurances for his client and his wife, which would compliment their existing default cover that he had in his super fund. As it turns out it was a the best thing they had ever done. Just 42 days after the client’s new cover was approved, he suffered a freak accident when the wire rope on his boat snapped whilst retrieving his boat at a local boat ramp. He spent a number of weeks in hospital with a number of serious lacerations and related injuries. Unfortunately, he was also blinded in one eye.. In the following weeks the adviser had the pleasure of giving his client the news that under a specific benefit with his new disability cover, he would be able to pay out his mortgage and able to financially deal with all that had happened. The insurer had paid out the claim for $1,375,000. This couldn't have come at a better time, with his wife having just been made redundant from her high paying job. This was undoubtedly a great outcome.

What I wanted to point out was that the automatic insurance cover that came with his industry super, refused to pay anything to him. Not even 1 cent!

In my experience as an adviser, clients always trust that the basic insurance they have in their super fund will help them in times of need, but the reality is that the cover is of such poor quality that only in rare cases are claims successful. It is a dangerous trend I see. The profession as a whole need to do more to point this out to clients. The cover is often insufficient in terms of quantity & quality. The reason it is of such poor quality is that the definitions around disability are so difficult to meet, and things such as permanently losing an eye don’t fall part of most policies. The policies also generally don’t underwrite clients when the policy is first put in place, so the client really has no idea what they are covered for, and what may possibly be excluded if a claim is made. At the end of the day, the client can have no real confidence that they’re covered appropriately and it can be many months before any decision is made!

We see many mums and dads that use their cheap and nasty insurance in super as their only back up and it's fraught with danger. I urge you to take a look at the cover you have in place currently and ask yourself if you think you're adequately covered.

I really just want everyone to be proactive in looking at their insurances regularly. I’d hate for any of my clients, friends or family be caught out by relying on group cover, and that is what makes me passionate about bringing this example to your attention. With all our clients, we review levels of cover, quality of cover and price at each review meeting. But for many families, this just doesn’t happen and it is a recipe for disaster. Many Australians don’t actually know what insurance is out there and what they need. This is where I can go through a client’s options and recommend appropriate cover for their situation. It is something recommend that everyone should do!


This information is current as at 20/11/17.

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