Written

For

The

Australian

-

Why

you

could

pay

a

high

price

for

not

knowing

what

your

life

insurance

policy

covers

Would you bet your family's financial future on the fine print of a policy you've never actually read? A recent Australian Financial Complaints Authority ruling has me convinced most people would lose that bet.

The case involved an auto mechanic seriously injured in a 2006 car accident. He couldn't kneel, squat or bear weight on his left leg — clearly unable to return to the workshop. Yet when he claimed on his super-linked Total and Permanent Disability policy in 2016, Zurich knocked him back. The insurer's reasoning? Sure, he couldn't be a mechanic anymore, but he could conceivably work as a service adviser or delivery driver. AFCA eventually overturned the decision and awarded him the benefit plus backdated interest — but it took years of fighting to get there.

This case exposes a trap sitting inside most default super fund insurance: the difference between "any" occupation and "own" occupation cover. "Any" occupation — the standard on most super-linked policies — gives insurers a wide-open door to reject claims by arguing you could theoretically do some other lesser job. "Own" occupation actually protects the job you trained for.

For surgeons, tradies, athletes and specialist professionals, this distinction is everything. The same trap now applies to income protection policies after the government forced insurers to water them down. An accountant with mental health issues might get paid under an "own" policy but denied under an "any" policy because they could technically work as an accounts assistant.

My advice is simple. Don't shop insurance on price alone. Read the Product Disclosure Statement. Understand your definitions — indexation, benefit type, replacement ratio, reinstatement clauses. And if you have a specialised or high-income occupation, seriously consider paying more for "own" occupation cover. What you think you're covered for and what you're actually covered for can be worlds apart — and you only find out when it matters most.