I would like to share a recent experience that highlights the importance of insurance cover in a comprehensive financial plan.
Last year in a review meeting, a client casually mentioned to us that several months prior he had suffered a heart attack, which was followed up with triple vessel bypass surgery. We were shocked to hear it but this particular client, who we shall refer to as ‘John’ had either forgotten to tell us or did not think there was anything we could have done for him. Fortunately for John, we had arranged modest amounts of Life, total and permanent disability (TPD) and trauma insurance cover on him in 2009. Due to his risky occupation we were unable to offer income protection at the time. Since then, his employer had mistakenly opened up a new super fund on his behalf, which included a default amount of income protection with a benefit that lasted 2 years. In the 6 months after his heart attack, John had been using up his sick leave, annual leave an long service leave to get by. Luckily for him, his wife was still working too.
Our response was to submit an income protection claim in order to preserve his employer benefits. At the same time we sent a claim to his trauma insurance provider. Trauma insurance pays a lump sum payment in the event that you are diagnosed with a specified illness (up to 45 major illnesses – depending on the insurer) including (but not limited to) things like cancer, heart attack, stroke etc. Thankfully this claim went through relatively quickly and John had his money within weeks. The income protection claim was a little trickier to deal with as the insurer insisted that by John using his annual and long service leave, it counted as ‘work’ and should offset the insurer’s liability to pay. Fortunately we had the policy wording and were successfully able to argue against this.
The client was pretty happy at this stage, as he had received $57,881 in trauma proceeds, his regular monthly income protection of $2,576, plus a back-payment of $20,504 for the funds they had argued to withhold. We weren’t finished there. John also had 2 TPD policies worth $22,998 and $227,115. He had not been to work since his heart attack and looked increasingly unlikely that he would ever work again. We submitted both TPD claims and recently received confirmation that both have been paid. This will make a significant difference to their retirement planning.
The 3 things we have learnt from this story are:
- Personal insurance is a vital part of any financial plan.
- Cheap ‘no-questions-asked’ cover can be extremely difficult to claim on but it’s better than no cover at all!
- When claiming, it helps if you have an experienced professional going into bat for you. The outcome could be substantially better.