Life insurance – what happens at claim time?

Most Australians have some level of life cover but very few people know the steps involved if you ever need to make a claim.


During what is often a very stressful period in people’s lives, it’s good to know what to expect - and that help is at hand.

The handling of life insurance claims came under scrutiny in early 2016 following allegations that the Commonwealth Bank's life insurance arm – CommInsure, had denied heart attack claims based on outdated policy definitions.

Quite understandably, the scandal rattled many consumers’ confidence in life cover. However, our money regulator ASIC undertook a review of life insurance industry. It found that across the full suite of life insurance products including income protection, Total and Permanent Disability (TPD) and trauma cover, “90% of claims are paid in the first instance”1. When it focused solely on life insurance, ASIC found only 4% of claims were declined2.

So the good news is that the vast majority of claims are paid out and last year alone, around $8.2 billion was paid out in life insurance policies3.

Managing the process

On a practical level, the real hurdle for many people is that claims on life insurance are usually made at a time of tremendous personal grief when it can be hard to think straight. It’s also a process most people have never been through before, or had experience with, so it can be hard to know where to start.

So, while it may sound like a depressing topic (and hopefully, you won’t ever have to claim on your insurance cover), it’s worth understanding the process involved. Not only does this makes things easier for you or your loved ones, it may also help to reduce any unnecessary delays in the payout stage.

 

Three steps to help make a claim with minimal hassle.

1
Review your PDS today

All the information you need to know about your life cover policy is contained in the Product Disclosure Statement (PDS). You should have read the PDS prior to accepting your insurance cover, but if you didn’t (or you have forgotten the detail), taking a look through the PDS today can alert you to any misunderstandings, and potentially provide the opportunity to rectify the situation if there are any.

I appreciate that a PDS doesn’t always make for light reading. If there is anything you are unsure about, contact me and I can explain exactly what’s involved.

2
Store key documents safely

When you go to make a claim, you’ll need to provide the insurer with your policy documents as well as additional paperwork, depending on the type of insurance claim, such as a death certificate or medical records. Storing your insurance documents in a safe place makes it easier to track down this aspect of the paperwork when it’s needed.

3
Contact my office as soon as possible if you think you need to make a claim

Your insurer needs to know as soon as possible that you plan to make a claim. Part of my ongoing service is that I can help you with the whole claims process, including help to complete the right forms at the right time, and I can liaise with the insurance company on your behalf. If you decide to manage the process with the insurance company yourself, be sure to keep a detailed record of what was said and who you speak to.

Talk to us about managing immediate cash needs

Depending on whether or not the policy involves a waiting period, even straightforward life insurance claims may take several weeks to be paid out. It can take longer if the insurance company requires additional information or if a superannuation fund trustee is involved in the process.

The whole point of life cover is to ensure loved ones are not left financially disadvantaged by the death or serious illness of a key family member.

With a range of expenses including medical bills and funeral costs that might need to be paid immediately, it is important to speak with me about managing your household cash flow. Whatever the right steps for your situation, whether it be selling an asset or claiming a government benefit, it’s critical to take early action so that your immediate cash needs are met without having to turn to high-interest debt, like your credit card. Similarly, I can assist with managing the proceeds of any claims to ensure they are invested according to your wishes and in line with the plans you have in place as a result of working with me.

However, it’s also essential to be confident you have the right level of cover in place so that if it’s ever needed, your life insurance will protect your family from financial hardship. As the level of cover required for your personal situation is likely to change over time, it’s important we regularly review your insurance cover to ensure it remains appropriate. Remember - this might also mean reducing your level of cover over time as children grow and your liabilities decrease.

You might also be interested in:

1 http://www.asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-347mr-asic-issues-industry-review-of-life-insurance-claims/
2 http://www.asic.gov.au/regulatory-resources/find-a-document/reports/rep-498-life-insurance-claims-an-industry-review/#infographic-snapshot
3 http://www.asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-347mr-asic-issues-industry-review-of-life-insurance-claims/

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