FAQ – Personal Risk Insurance

Frequently Asked Questions – Personal Risk Insurance

Find out about what is personal risk insurance and how it works to protect you and your family when you need it most.

Why should I take out life insurance?

Life insurance provides financial protection to your loved ones in the event of your unexpected death. It can help cover expenses such as funeral costs, outstanding debts, and ongoing living expenses. It can also provide a lump sum payment or income stream to support your family’s financial needs. It’s a way to ensure that your loved ones are taken care of financially if you are no longer able to provide for them.

What is “TPD” insurance cover?

TPD insurance stands for Total and Permanent Disability insurance. It provides a lump sum payment if you become totally and permanently disabled and are unable to work again. The definition of”total and permanent disability” can vary depending on the policy, but it generally means that you are unable to work in either your ‘own’ or ‘any’ occupation for which you are reasonably suited based on your education, training or experience. TPD insurance can provide financial support to cover medical expenses, rehabilitation costs, and ongoing living expenses, among other things. It can help provide peace of mind and financial security in the event that you become disabled and can no longer work.

Why do I need TPD cover when I can access NDIS if needed?

TPD insurance and the National Disability Insurance Scheme (NDIS) serve different purposes and can work together to provide you with comprehensive financial support in the event of a total and permanent disability.

TPD insurance provides a lump sum payment that you can use for any purpose, such as paying off debts, covering medical expenses, or making modifications to your home. This payment can provide financial security and help support you and your family.

On the other hand, the NDIS provides ongoing support for people with a disability, such as access to funding for support services, therapy, and equipment. However, it is a means-tested government program and not everyone will be eligible for support, or the level of support may be insufficient.

Having TPD insurance can help fill any gaps that may exist in the support provided by the NDIS. It can also provide additional financial security, which can help relieve the stress and uncertainty that comes with a total and permanent disability. Ultimately, having both TPD insurance and access to the NDIS can provide comprehensive financial support and peace of mind for you and your family.

What is “Income Protection” cover?

Income Protection insurance provides you with a replacement income if you are unable to work due to illness or injury. It can help cover your ongoing living expenses, such as your mortgage, bills, and daily living costs. Without this cover, you may have to rely on your savings, government benefits, or the support of your family and friends, which may not be enough to cover all of your expenses.

Income Protection can provide peace of mind and financial security, allowing you to focus on your recovery and return to work when you are ready. It can also provide a safety net for those who are self-employed or who do not have sick leave or other benefits available to them through their employer.

What is “Trauma” insurance?

Trauma insurance, also known as critical illness insurance, is a type of insurance that provides a lump sum payment if you are diagnosed with a specific medical condition, such as cancer, heart attack, or stroke. The payment is designed to help cover the costs associated with your treatment and recovery, as well as other expenses such as lost income or modifications to your home. The specific medical conditions covered by trauma insurance can vary depending on the policy, but they generally include serious illnesses that can have a significant impact on your life. Trauma insurance can provide financial support during a difficult and stressful time, and help you focus on your recovery without worrying about financial issues.

I already have TPD and Income Protection insurances, why do I need Trauma/Critical Illness cover?

While TPD and Income Protection insurances are important forms of cover, you may not qualify for a payment if your serious illness does not prevent you from working. For example, you may have been diagnosed with cancer and you are able to work from home during treatment. In this example, if you don’t have Trauma/Critical Illness cover, you will have to pay for out-of-pocket medical costs your self.

Income Protection is designed to replace your lost income and may not cover all of your expenses, especially if you require expensive medical treatment or long-term rehabilitation.

Can my non-working spouse take out Trauma cover?

Yes, your non-working spouse can take out Trauma cover. Trauma insurance is available to anyone who meets the eligibility criteria of the policy, regardless of their employment status.

When considering Trauma insurance for a non-working spouse, it is important to consider the financial impact that a serious illness or injury could have on your family. If your non-working spouse was diagnosed with a critical illness, such as cancer or heart disease, the costs associated with their medical treatment and care could be significant and they may be unable to perform their normal household duties. This can place a significant financial strain on the family, as the working spouse may need to take time off work to care for their spouse, or pay for additional support services.

Trauma insurance can provide a lump sum payment that can help cover these costs and provide financial security for the family. Having Trauma insurance for a non-working spouse can help provide financial support during a difficult and stressful time, and help the family maintain their standard of living while supporting their loved one’s recovery.

Before taking out Trauma insurance, it’s important to understand the terms and conditions of the policy and ensure that it meets your needs and budget.

Why do I need to provide my medical history and lifestyle choices to insurance company when taking out personal insurance cover?

Insurance companies require information about your medical history and lifestyle choices when taking out personal insurance cover because they need to assess the level of risk that you pose. This information helps the insurer to determine the likelihood that you will make a claim, and the level of premiums that they need to charge to provide coverage.

Your medical history can provide insight into any pre-existing conditions or illnesses that you may have, which could increase the likelihood that you will make a claim. For example, if you have a history of heart disease or cancer, you may be more likely to make a claim for Trauma insurance.

Similarly, your lifestyle choices can also impact your risk profile. For example, if you smoke or have a history of heavy alcohol consumption, you may be at a higher risk of developing certain medical conditions, which could increase the likelihood of making a claim.

By providing this information, the insurance company can accurately assess the level of risk that you pose and ensure that you are charged an appropriate level of premiums. If you fail to disclose relevant information, this could result in the insurer rejecting your claim, cancelling your policy or increasing your premiums.

It’s important to be honest and transparent when providing information to the insurer to ensure that you are adequately covered and to avoid any potential issues with your policy.

What happens if I take out life insurance that doesn’t ask for my medical history?

If you take out a life insurance policy that doesn’t ask for your medical history, and you later make a claim, the insurance company will still investigate the circumstances surrounding the claim to determine whether it is valid. This investigation will likely include a review of your medical history, even if you did not provide this information when you took out the policy.

If the insurance company discovers that you had a relevant medical condition before you took out the policy, they may reject your claim or cancel your policy.

What happens if I don’t disclose all of my medical issues to the insurer?

If you fail to disclose all of your medical issues to the insurer, it could impact your ability to make a successful claim later on. Insurance companies require you to disclose any relevant information about your health and medical history when applying for coverage, and failing to do so could be considered fraudulent or a breach of your duty of disclosure.

If you do not disclose all of your medical issues, and you later make a claim, the insurance company will investigate the circumstances surrounding the claim. If they discover that you failed to disclose relevant medical information, they may reject your claim, cancel your policy or increase your premiums.

What if I forgot to disclose something that later was relevant to a claim?

If you forgot to disclose something that later becomes relevant to a claim, you should contact your insurer as soon as possible to inform them of the information that was previously omitted. You have a duty to disclose all relevant information about your medical history and health status when taking out insurance coverage, but it is not uncommon for individuals to forget certain details or not realise their significance at the time of application.

Failing to disclose relevant information at the time of application could be considered fraudulent ora breach of your duty of disclosure. However, if you promptly inform your insurer of the omitted information, you may still be eligible to make a claim. In some cases, the insurer may adjust your premiums, modify the terms of your policy or exclude certain conditions from coverage.

It’s important to note that insurance companies have access to a range of resources to investigate claims, including medical records and information from healthcare providers. If they find evidence that you knowingly withheld information or provided false information, they may use this as grounds to deny your claim.

To ensure that you are adequately covered and to avoid any potential issues with your policy, it’s important to be honest and transparent when providing information to the insurer. When taking out insurance, make sure to read the terms and conditions of the policy carefully and disclose all relevant information about your medical history and health status. If you are unsure about what information you need to provide, you may want to consider seeking advice from a financial advisor or insurance broker.

What is the 3-year rule on a personal insurance policy?

The 3-year rule on a personal insurance policy refers to the time period during which an insurance company can contest a claim based on a material misrepresentation made by the policyholder.Material misrepresentation refers to an omission or false statement made by the policyholder on their insurance application that is deemed material to the insurer’s decision to provide coverage even if it was an accidental omission.

If a material misrepresentation is discovered within the first three years of the policy’s issuance, the insurer can contest a claim or void the policy altogether. This is because the insurance company relies on the information provided by the policyholder to make a decision about providing coverage, and if this information is inaccurate or incomplete, it can affect their ability to accurately assess the risk and price the policy.

After the three-year period has elapsed, the insurer generally cannot contest a claim or void the policy based on material misrepresentation, unless it can be shown that the policyholder acted with intent to deceive.It’s important to be honest and transparent when providing information to the insurer, to ensure that you are adequately covered and to avoid any potential issues with your policy. When taking out insurance, make sure to read the terms and conditions of the policy carefully and disclose all relevant information about your medical history and health status. If you are unsure about what information you need to provide, please contact Prudentia Financial Planning.

Why should I pay for financial advice for my personal insurances when I can get insurance throughone of those free comparison websites?

While it is possible to purchase insurance through free comparison services, paying for professional financial advice can provide several benefits when it comes to your personal insurances.

Firstly, a financial advisor can help you identify your specific insurance needs and tailor a policy to meet those needs. They can help you assess the risks that you face and determine the appropriate level of cover to provide adequate protection. This can ensure that you are not overpaying for insurance that you don’t need or underinsured and exposed to financial risk.

Secondly, a financial advisor can help you understand the terms and conditions of the policy and ensure that it provides the level of cover that you need. They can help you navigate the complex world of insurance and explain any confusing jargon or technical details.

Finally, a financial advisor can help you choose the most appropriate policy from the range of options available. They can help you compare different policies and providers to ensure that you are getting the best value for your money. This can help you save money in the long run and provide greater peace of mind.

While free websites and comparison services can provide a convenient way to purchase insurance, they may not provide the level of personal attention and advice that a financial advisor can offer. By paying for professional financial advice, you can ensure that you are getting the most appropriate and cost-effective insurance policy for your needs.

Please contact Prudentia Financial Planning today for an assessment of your personal insurance needs.

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Sofie Korac is an Authorised Representative (No. 400164) of Prudentia Financial Planning Pty Ltd, AFSL 544118 and a member of the Association of Financial Advisers.

Financial Advice Sydney and the North Shore Office based in Gordon NSW

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