In previous blogs we have talked a lot about Group Life Insurance (e.g those annoying ads on TV from real insurance and cover that the industry funds give you without any questions) and Retail Life Insurance (e.g when you have to answer a thousand questions to obtain the cover). As Financial Planners we believe life insurance plays a very important role in the protection of your wealth, but we are also aware that group cover generally has many pitfalls. Without naming and shaming the particular company, there is one superannuation fund that I believe provides one of the worst group policies in the industry. Some of the concerns are:
For income protection cover: if the insured is classified as Permanently Disabled they will cease to pay the benefit. Though this does mean you will be potentially eligible for the TPD payment, we find in many cases the TPD level of cover is quite minimal especially for the members in their 50s. It was only last week where I have seen an example of this. A client (who is on claim) was contacted by the claims officer to obtain an update on their progress. The officer asked when the client was to return to work and the client indicated that at this point in time their doctor will not allow them to work anymore days. The claims officer then indicated to the client that this now changes everything and that she will be assessed as permanently disabled and that they could cease the benefit. Obviously not the most friendliest comment to be making to a person on claim.
All covers: Another strange rule which I have found with regard to a group policy is if you DO NOT have superannuation contributions being deposited into the fund then you will not be covered. For example if you were to take unpaid leave then you are not covered. Again I do not believe this is an ideal scenario when it comes to insurance!
The important rule here is always read the Product Disclosure documents. Insurance can be cheap for many reasons and sometimes you will only find out on these little clauses when it is too late.