Changing Insurance Terms & Definitions

unsure on insurance

Life insurance in super

It is likely that you know whether you have life insurance through your super fund, and you may even know the amount and the premiums you are paying for the cover. It is highly unlikely though that you have read the latest Product Disclosure Statement and understand the terms and definitions used in ascertaining whether anything will be paid out. More importantly is that with ‘Group Insurance’ these terms and definitions can change. 

One of the problems with ‘group life insurance’ which is what is offered by most superannuation funds is that they are renewable. This means, and unlike an individual insurance plan, the super fund must re-negotiate with the insurer the terms of cover. Ergo, there is no certainty that the current terms and definitions will continue.

Changing insurance terms and definitions

This was brought into stark reality for me when I became aware that my retail super fund had altered the insurance definitions. I wasn’t notified of the change, but came across it whilst researching the product for a client. Below are the exclusions for the death cover portion when I started the policy:

original-exclusions

Below are the current exclusions:
current-exclusions

Four more exclusions have been added and I find that unacceptable. I am particularly concerned by the exclusion if death occurs as a result of participation, or intention to participate, in an illegal activity. Does that include speeding, accidentally running a red light? The lack of certainty compelled me to cancel my group insurance policy and arrange individual insurance cover; I also saved around $350 per annum.

The problem is widespread

There would be hundreds of thousands of Australians with the above group cover, and most would be oblivious to these new terms and definitions. That is until it comes to claim time. But the above is simply one example; because group life cover is renewable every few years a new agreement must be made. And that impacts industry super funds, employer default super funds and any retail super funds which offer group cover.

Some quotes from Adele Ferguson’s article on the same topic are relevant:

“An investigation by Fairfax Media reveals that a slew of super fund trustees have recently been renegotiating life insurance contracts with insurers” … “The investigation suggests some, but not all, super fund trustees have given too much ground in these crucial negotiations, potentially rendering some policies junk insurance.”

What’s the most important thing with insurance policies?

That they pay the funds at time of claim.

If you have a super fund, then you should be reviewing the attached life insurance, ascertaining its appropriateness and comparing the price with alternative providers. Avant Financial will be pleased to assist you with this.

 

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