Some months prior the client had been driving home from her office when another vehicle ran a red light & careered into the side of her car. Her injuries were quite extensive – a partially compressed spinal cord resulting in permanent partial paralysis of the left side of her body. She was hospitalised for many weeks and even though she has been through gruelling rehabilitation programs, today she is still unable to walk without the assistance of a walking stick.
She is a partner in a small business and, when she isn’t working, she is busy raising two children as a single mum. Although she was concerned about her situation, she felt somewhat at ease knowing that she could make a claim on her income protection policy which had been in place for seven years. Her business partner could keep the business running for a period, and the insurance company would ensure that the mortgage was paid and food was kept on the table.
It was when she put her claim form in (with one of Australia’s leading insurance companies) that her world began to crumble. Our research revealed:
- She was initially advised to apply for a policy with a 2-year benefit period. This made sense at the time of application because she and her partner had just started their business and, besides not having a ‘revenue history’ at that point, they needed to keep costs to a minimum. Unfortunately, that was the last time she saw her adviser and her policy was never reviewed or updated.
- Her income had increased substantially since applying for her policy but she never ensured that her benefit kept pace with her income. Who isn’t guilty of doing this? Running a new business, raising a family….who has time to remember these things unless you receive the friendly reminder from your planner? Her spending had kept pace with inflation though and she had the mortgage & loans to prove it. She was only insured for 40% of her income.
- Her insurance contract had a clause that allowed the insurance company to “reduce benefits payable by any other legislated benefits, whether actually claimed or not”. She was entitled to sue for 3rd party compensation (a legislated benefit), which meant that her benefit (40% of income) was going to be reduced even further, whether or not she had actually received any compensation.Understandably, her stress levels went through the roof.
Not only did this have a detrimental effect on her life, but her business partner was forced to do the job of two people to keep the business operational. Eventually she was forced to borrow money from a friend so that she could pay the bills and feed her children. She was losing her home, her business and her dignity.
We made an urgent call to the Chief Claims Manager at the insurance company &, after some ‘gentle persuasion’, he at least agreed to pay her the full 40%. I guess the thought of one small claim was far more attractive than a tidal wave of bad publicity.
Today, she is working back in her business, but in a less strenuous capacity. Thanks to the support of her business partner and her friends she has kept her home and her belongings.
Unfortunately she has been forced to keep her existing income protection policy because she is no longer insurable. She just accepts the fact that she is stuck with a sub-standard contract and prays to God that she will never have to make a claim again.
She still has not received any 3rd party compensation payments.
There are a myriad of Income Protection contracts in the Australian marketplace. Some are cancellable, some non-cancellable. Some are agreed-value & some are indemnity. Some you will find inside your superannuation & some you can purchase on-line or through a financial planner or broker.
Do you know which one you have? Are there any offset provisions in your contract?
These contracts can be so confusing but you do not want to find out any shortcomings in your policy when you are stuck in a hospital bed & up to your neck in plaster!
Doing some research or, better still, obtaining professional advice before you sign any documents can save you a lot of heartache at claim time.
And finally, please do not deal direct with the Insurance companies if you can avoid it. If you have a financial planner/broker then ask him/her to manage the claim on your behalf. They will have the contacts & knowledge to get the right outcome for you.
Please connect with me or contact me if you would like to discuss this matter any further.