Knowing your Personal Insurance

Knowing your Personal Insurance LIFE INSURANCE text written in a notepad near a cup coffee, eyeglasses and pen on a wooden background. Business concept.

Knowing your Personal Insurance.

With interest rates and cost of living on the rise, I am seeing more clients questioning the value of their Personal Insurances. I’ve found that in many cases this is because they are unclear on what they are covered for or if it will pay out when they do need it.

What is Personal Insurance?

It is insurance you take out on yourself or a family member, for personal or business reasons, such as:

  • Life or Death Insurance

Pays a lump sum when you die or are diagnosed with a terminal illness.

Life insurance can help your partner or dependent’s to repay debt, cover living expenses or replace income, funeral costs, children’s education costs for example.

It’s Important to Understand

Not all insurers will payout a Life insurance benefit upon medical diagnoses of a terminal illness. This is important to some who wish to reduce any financial hardship and stress, which may allow them to spend more quality time with their loved ones, whilst creating lasting memories if they are diagnosed with a terminal illness.

Top 5 Causes of Claims

As per the Life Insurance Claims date for 2019, the top 5 causes of claim were Cancer, Accident, Circulatory System, Abnormal Clinical Findings and Nervous System.

  • Total and Permanent Disability Insurance (TPD)

Pays a lump sum to you to help cover living costs and rehabilitation costs in the event you are unlikely to return work again due to you becoming totally and permanently disabled due to a sickness or injury.

TPD insurance can help you to repay debt, cover living expenses or replace income, rehabilitation and medical costs, modifications to your home, children’s education costs for example.

It’s Important to Understand

Each insurer will have a different definition of totally and permanent disablement. If you apply for TPD insurance you will apply for one of the definitions below. The eligibility of each definition may vary on your occupation.

  • Own Occupation, at the time of claim you are unlikely to work in your usual occupation as the result of an illness or injury (not available in superannuation).
  • Any occupation, at the time of claim you are unlikely to work in any occupation based on your education, experience, or training as the result of an illness or injury.
  • Home duties, at the time of claim you are unlikely to be able to carry out ALL normal household duties or work again.
  • General occupation, you have suffered the loss of limbs and/or sight, or unable to look after yourself ever again, or permanent loss of intellectual capacity and unlikely to ever work again.

Top 5 Causes of Claims

Mental Disorders, Musculoskeletal System, Accident, Nervous System and Cancer.

  • Trauma or Living Insurance

Pays a lump sum to you if you are diagnosed with a specific major illness or injury, such as cancer.

Trauma insurance can help you to pay debt repayments, out of pocket medical expenses, living expenses or replace income, rehabilitation costs, modifications to your home for example.

It’s Important to Understand:

Each insurer will insure different major or critical illnesses and injuries and will have different definitions for each illness or injury.

Top 5 Causes of Claims

Abnormal clinical findings, Nervous system, Accident, Circulatory System and Cancer.

  • Income Protection Insurance

Pays a percentage of your income as a monthly sum to you if you are unable to work due to an illness or injury.

It’s Important to Understand

Income Protection insurance replaces up to 70% to 75% of your monthly income.

An Income Protection policy will have a Waiting period, such as 14, 30, 60, 90 days or longer, which is the time you must be unable to work and under regular care of your doctor for your illness or injury. You can choose your waiting period based on how much sick leave or annual leave you have, or emergency funds you have saved up.

There will also be a Benefit period, which is how long your monthly repayments will last for whilst you are unable to work due to your illness or sickness. This may be for two years, five years or to age 65 for example.

Top 5 Causes of Claims

Cancer, Circulatory System, Accident, Mental Disorders and Musculoskeletal System.

How are your premiums calculated?

Your personal insurance premiums are calculated based on the following:

  • Total sum of cover you apply for,
  • If you opted in for additional features on your policies,
  • Age,
  • Gender,
  • Occupation,
  • Hobbies or recreational activities,
  • Smoking status,
  • Loadings for some pre-existing medical conditions or injuries,
  • CPI increases.

In addition, insurers generally offer two types of premium structures:

  • Stepped premiums. Premium which are recalculated yearly on the anniversary date/renewal, generally increasing each year as you get older.
  • Level premiums. With this structure, you’ll be charged more in earlier years and less in later years than stepped premiums. Your age when your insurance starts will determine the level premium you pay.

Claiming on your personal insurance.

Often, I have found people who are insured may not actually realise what they are insured for or are aware that they may be eligible to claim against their insurance.

If you are looking to make a claim through your insurance, you should speak to your insurance specialist or financial advisor first. If you do not have a specialist or advisor, you can either contact one for assistance or contact your insurer directly, superannuation fund or employer for any employment arrangements.

Based on APRA’s Life Insurance Claims and Disputes Statistics June 2022, it highlighted that Individually Advised policies showed higher admittance rates than non-advised policies for the same cover, being the result of the policyholder not having clear expectations up front of what they are covered for or an advisor being able to discourage the policyholder from lodging a claim knowing that they are not covered by the policy.

Based on ASIC’s review, on average Total and Permanent Disability (TPD) and Trauma/Living insurance claims were declined more so than Life and Income Protection policies between 2013 – 2015. With over 47% of claim disputes being related to evidence and delay.

It is important to take the time to better understand what cover you need, what policy is best suited to you and your needs and getting it right to make it easier for you or your family should you need to make a claim in the future.

If you do not have a good understanding of your existing personal insurance, you would like to review your policies, or you would like to apply for the right insurance but don’t know where to start, please contact your existing advisor or contact me, Jess Robinson.

This article is general in natural and has not taken into account your personal circumstances. You should seek specialist advice from a qualified Professional Financial Advisor or Insurance specialist.


Jess Robinson

Jess is a mum of two little ones, based in Orange. Jess has over ten years of experience in the financial services industry. Jess loves to help others better understand their financial situation, whilst supporting and celebrating her clients as she helps them and their families to achieve their short to long-term goals, and to feel more financially confident about their decisions.

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