Life Insurance Packages – Know What You Are Buying

I read an article recently written by a financial counsellor/ commentator who was providing advice about personal insurance. I’m not sure if he has any qualifications in this field, but an accountant friend of mine had indicated his work was worth reading.

On the topic of insurance, he talked about topping up the cover available in your industry superannuation fund, where you may have a need for higher levels of insurance protection than is available under the automatic acceptance levels of the fund. Today, I just want to talk about the fact that the cover offered by any industry superannuation fund will not always provide the desired outcome at claim time, if you are ever seriously ill or injured.

When we recommend insurance to clients, our recommendations are always on an “own occupation” definition basis. Why is the “own occupation” definition so important? The first thing to say is that this definition is not available within industry super funds. The definition enables you to make a claim in the event that the insured event effects your ability to do your job, not anyone else’s job, your job. A lawyer who suffered an illness or accident that is covered under their “own occupation” policy cannot be forced to find work as a baker, or a house cleaner. He or she simply needs to show that their illness is effecting their ability to work as a lawyer in order that a claim be made and generally be payable, under an “own occupation” definition.

The definition that applies to insurance within industry superannuation funds is an “any occupation” definition – any job. Can you work at all in any job – if so then generally speaking a claim may not be payable.

When is this important? It is important in the context of all Total and Permanent Disability claims and all Income Protection claims. Of course, if the illness/ injury means you can’t work in any occupation then the “any occupation” definition may be adequate.

There are many examples of cases where clients have followed the advice to take “own occupation definitions and had claims paid where a client with an “any occupation” definition would not have been paid. Whilst this is obviously subject to insurer underwriting requirements, many clients will have access to “own occupation” definitions even if they need to pay a few extra dollars for the privilege.

If you are relying on insurance provided within an industry superannuation fund, I suggest you spend some money and talk to a qualified Financial Planner, preferably a Certified Financial Planner (CFP) within a Professional Practice designated by Financial Planning Association. You’ll appreciate the advice he or she will provide, especially at claim time.

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