Would you buy a car without test-driving it ?
That sounds like a silly question - of course you want to test-drive a car before you commit to purchasing it. That's just common sense. But in my experience, people regularly purchase insurance without first considering how to use that insurance.
You buy insurance to make claims
Again that sounds obvious, but the purpose of insurance is to financially protect you if something goes wrong. So just like the car example, you should discuss the claim process with your broker ahead of time. Don't wait until something's gone wrong before you find out whether the insurance was actually suitable for you or not!
Test run of personal accident insurance
This test-run is extremely important when it comes to protecting the best machine you cannot buy - i.e. you, yourself! Many insurance brokers promote personal accident & illness insurance, but fail to adequately explain the pros and cons of the policy.
Personal accident and illness insurance is perfectly adequate for what it is - it's a low cost and easy-to-purchase income replacement insurance against accidental injury or unexpected illness. However it has some serious drawbacks:
- Not guaranteed renewable. That means that once you make a claim, the insurer will likely refuse to renew the policy or at least will probably exclude that body part from future cover.
- Excludes expenses incurred deriving your income. If you spend $5,000 a year on petrol for your job, the insurer will deduct the $5,000 when calculating your income.
- Short benefit period - usually a maximum of 2 years' income covered following injury or illness.
- Injuries must be accidental - so no cover for say a strained shoulder where you can't point to a definitive date and time when the injury occurred.
- All pre-existing injuries or illnesses are excluded, and are underwritten only at the time you lodge a claim. This means that at the most stressful time (i.e. when you've fallen ill or have been injured), the insurer will be poring through past medical history to determine if the complaint is in fact a recurrence of an older one. If so, no cover available.
If you have personal accident insurance in place, were you aware of all of these drawbacks? If no, you need better advice than you're currently receiving.
Advice not insurance
With decades of experience in no-nonsense risk management, I specialise in advising Australian small business in managing risks and appropriate insurance selection. Don't assume that everything you see on TV is true - get real advice from someone with your best interests at heart before you commit to insurance products.