In a previous article I explained the differences between having your personal risk insurance held inside your superannuation policy compared to having it held outside your super. In that article I mentioned that there’s also a difference between group policies and individual policies. Here, I’d like to clarify and show you some of the upsides and downsides to group policies available in the market place.
Group policies generally have the following benefits:
- Less paperwork to complete.
- Few or no health questions on application.
- Usually cheaper premiums.
- Can be paid for by employer or super contributions.
- You have a choice of Life, TPD, and Income Protection policies.
But some group policies have the following limitations:
- Sometimes you don’t get underwritten until you claim, leading to claims being rejected.
- Without upfront underwriting, most policies have built-in exclusions for all or any pre-existing conditions.
- Benefit amounts are limited and may not reach the levels you need.
- You get little or no advice & there is no advisor present to help you select the right cover and amounts.
- There is no advisor to go into bat for you at claim time, ensuring you get all your entitlements.
- Potentially higher premiums.
- Very basic cover benefits with no bells & whistles available.
- Not usually world-wide cover.
- You can’t get Trauma cover or Business Expenses.
One of the key benefits to group policies is that you can get limited levels of cover without having to undergo any medical questions or tests. This is great for people who have had medical issues in the past and want to get some form of protection. With some group policies this can be very good. But there are other group policies that will still underwrite you, but they do it at claim time. What this does is leave the door open for a claim rejection due to “pre-existing medical history”. Some group policies don’t apply this philosophy, so it’s about knowing what you’re covered for and what you aren’t.
At the end of the day, it all comes down to getting the right advice, or at least doing your own research before you commit to your cover. I know that I harp on about getting advice, and that’s probably because I’m a “Financial Advisor” and I’m biased. But just because I’m biased, doesn’t mean it’s a bad idea. I’m also an avid mountain bike rider and a capable researcher. I’ve realised over the years that my performance on my mountain bike has improved every time I’ve sought the right advice from people with industry experience. Many times I’ve had to spend money to get the advice. Just as many times, I’ve saved money because of the advice, while at the same time getting better results.
Life insurance and mountain bike riding aren’t the same things, I know. They aren’t even the same class of thing. But advice from industry experienced individuals is valuable no matter what industry you’re in. Deciding on your choice of insurances can be easy based on your situation or it can be complicated. My suggestion is to find an advisor you trust and at the very least bounce your insurance ideas off him or her. They could save you.