Life Insurance and Income Protection – What you should look out for

Published 16 Sep 2014

One of the biggest problems clients face when making a claim on their Income Protection Insurance is that they were not adequately informed on all the terms and conditions of their policy when they bought it and subsequently how these terms and conditions are being interpreted by the Insurer.

For example, these policies usually have stringent wording around pre- existing medical conditions. This means that if, for example, you have previously suffered from a back injury or illness and after taking out your insurance at some point in time make a claim arising out of a back injury, you may not be covered under your Income Protection policy.

Another thing to be aware of is the waiting periods that apply to the cover. Waiting periods can typically be anywhere from 14 days to two years and fall under two categories:

  • The waiting period that must pass before you can make a claim. For example, a policy holder has a heart attack and must serve out the stipulated 90 day waiting period after the heart attack to lodge.
  • The second is the waiting period a policy holder must pass before being eligible to make the claim. For example, the claimant is not eligible to make a claim as a result of suffering from a heart attack until a one year waiting period is completed. This is much like waiting periods that apply with private health cover.

Another aspect to be weary of is the Buy Back Option available from some insurers. Normally only one trauma benefit is ever payable to an individual under a policy. After a payout you may be offered to “Buy Back” your original policy. However you should note that the Buy Back option on most occasions stipulates exclusions to the document once it is reinstated that you did not have previously under your original cover.

For example, Mr Smith takes out Life Insurance and suffers a stroke. He makes a claim and is paid the benefit. Subsequently, the insurer offers him the buyback option, which Mr Smith accepts. Mr Smith however is not made explicitly aware that the buyback conditions stipulate that if he suffers from either a stroke or a heart attack under the Buy Back option, he cannot make further claims.

If you have suffered injury or illness and hold a Life Insurance or Income Protection Policy, please do not hesitate to immediately contact our specialist Superannuation Lawyers at Gerard Malouf & Partners for legal advice.

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