One of the most commonly held misconceptions is that insurance companies will not pay you when the push comes to shove. Most people have heard about a friend or someone who knows someone that tried to claim and found they couldn’t, where they thought they would be able to.
While these stories no doubt have started from a seed of truth, it is foolish to leave yourself uncovered simply because of them. The reality is that the difference between getting paid on an insurance policy and not, usually comes down to the quality of the insurance contract that was selected in the first place and how appropriately it meets the individual needs of the policy holder.
Insurance policies are not created equally in all instances and for this reason it is necessary to fully understand the contract you are entering and that it is meeting the need you intend for it to protect before taking it out in the first place.
Take life insurance for instance. Some poor contracts will cover for accidental death only, essentially putting a caveat on the way you die. A good quality contract will pay regardless of the reason for the passing and this is of course what we would all expect from our policy when we are protecting our dependents against the risk of us dying and no longer being able to provide for our families.
This life insurance example is just one of a multitude of policy differences that exist that will affect the claim outcome. Particularly when comparing policies covering Income Protection and Trauma.
Insurance companies are paying out claims all the time and the recipients are benefiting from the protection they have invested in!
In 2011 the claims paid by product type by 11 of Australia’s major insurers were:
(Note: These figures do not include all the vast amounts that are paid from superannuation funds group insurance policies for ‘early retirements’ due to illness, injury and death, so the reality is much more than shown here)
Product: INCOME PROTECTION
TOTAL $Paid: 3,974,871,115
TOTAL No: 62,352
An average $15.9 million was paid to 251 Australians every working day in 2011.
(stats reproduced with kind permission from the risk store)
Personal insurance protection is not a topic of conversation that many of us feel comfortable with, but in reality the most important thing that most of us should insure is our own ability to earn an income. Supporting not only our lifestyle today, but also our savings plans for the future.
In order to arrange a complimentary review of your insurance needs, including a review of any existing cover you have compared to the market, click here.
• Written by James McFall, Director & Financial Planner, Property Planning Australia