One of the most frustrating aspects of life insurance for clients is that not all policies are the same. This makes it hard for the ‘person in the street’ to ensure that the cover they take is the cover they need.
One simple complication is the term ‘life insurance.’ While you may think that life insurance is insurance that pays out if you lose your life – that is, if you die – the term life insurance is actually used for a broader range of insurances. These include income protection insurances (which pay you when you are temporarily unable to work due to illness or injury), total and permanent disability insurances (which pay you if you are permanently unable to work due to illness or injury) and trauma insurances (which pay you if a particular health event occurs, regardless of whether you are prevented from working).
So, what most people think of as ‘life insurance’ is more accurately described as death insurance: insurance that pays money to your loved ones if you die while you hold the cover.
But this is just one complexity. Another is the fact that some life insurances can be paid for using super. Others cannot. Even more confusingly, some forms of a particular life insurance, such as total and permanent disability, can be paid for using super benefits, while other forms of the same type of cover cannot.
What’s more, using super can lead to other complications when the time comes for money to paid out. A few years ago we saw a potentially tragic situation of a father whose one year old daughter needed a liver transplant. Her dad, being a direct relative, was an obvious candidate as a donor. Even better, because she was so young, the liver did not need to be very big. That meant that her dad only needed to donate a part of his own liver.
It took Dad about three nanoseconds to make the obvious decision to save his daughter’s life by donating part of his own liver. But having part of your liver removed is no small thing. Dad needed to be off work for several months. Happily – he thought – he had an income protection policy with a 30 day waiting period. This meant that, once he was off work for 30 days due to illness or injury, he thought he would start to receive a payment of 75% of his income for the remaining months until he returned to work.
Unfortunately, the income protection was held through super. To receive a payment, he needed to withdraw benefits from the super fund. But the fine print on the policy prevented access to insurance funds in cases of ‘elective surgery.’ And the definition of elective surgery covered what was happening to this Dad: he would not die if he did not have the surgery (although his daughter would have).
Happily, in this particular case, the insurer found a way to allow the family to receive a payment. But that came after a very difficult period for the family and followed a dedicated media campaign to help them – as well as expert advice about insurance.
Expert advice like that is what we are all about. We can help you navigate your way through the complexities of life insurances and ensure that the policy you take up – and pay for – is the right one for you and your family. So, give us a call, and let us help you make sure you get what you expect.