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Life insurance loopholes: How well do you know your policy?


Your superannuation is more than just a retirement fund; superannuation products can offer vital insurance to protect the account holder (and their dependents) if they are left unable to work due to serious injury, illness or disability. Ultimately, insurances offered through your superannuation fund can provide great comfort and protection if tailored correctly to your needs. However, if you don’t understand how the insurance works and what your policy covers, your claim may be deemed ineligible or your payout denied when you or your loved ones need the support most. Read on to find out more.

How does superannuation insurance work?

Most super funds automatically enrol members in life insurance (also known as death cover) and total and permanent disablement insurance (TPD). These insurances are designed to pay a benefit should you become unable to work because of death, injury or illness.

Income protection insurance is another policy commonly offered by super funds. It means the super fund pays you an income for an agreed period if you are temporarily unable to work due to disability or illness.

Our tips:

  • Ask questions about your policy from your super fund and have them confirm this in writing so you can refer to it at a later stage if needed.
  • Seeking professional financial advice regarding your insurance portfolio is another way to ensure your insurance policies are suited to your individual needs.

What is included in a life insurance policy?

It can be difficult to decipher what is covered by a life insurance policy, as we are often flooded with product disclosure material and supporting documentation from super funds when assessing a life insurance policy. An equally important question to ask is ‘what is not covered by this life insurance policy?’

Life insurers are well within their rights to reject claims based on strict exclusion clauses that are often buried deep in your paperwork. This means it is vital for you to understand what you are covered for and ensure your policy fits your needs. Again, we recommend asking questions about the policy from the provider and have the response in writing, so you have a record to refer back to if needed.

Can you be denied a life insurance payout?

Ultimately insurers are a business, so make decisions about policies based on their interests; they’re not prioritising what is best for the policyholder. There are a variety of reasons why claims for life insurance payouts are delayed or denied, causing the would-be beneficiaries of the policy to suffer. Read more about delay tactics used by super funds.

Reasons why life insurance claims are denied

Why a life insurance claim is denied will depend on the specific policy, as each can differ. Generally, life insurance claims may be denied in situations where the:

  • policy lapsed due to non-payment before the insured’s death
  • policyholders’ cause of death wasn’t covered by the policy
  • cause of death was suicide
  • insured did not disclose a condition to the insurer, with the condition contributing to the insured’s death
  • insured forgot to include life insurance within their policy.

If an insurer denies your claim, this isn’t necessarily the end of the road. Our superannuation and insurance experts can offer you no-obligation legal advice regarding your situation and whether you can appeal your insurer’s decision.

Can you have multiple insurance policies?

With each insurance policy offering a slightly different service, it’s easy to consider simply taking out multiple policies to avoid any gaps in coverage.

In Australia, you are allowed to have multiple life insurance or TPD policies, provided you disclose the policies you hold to your providers.

It’s important to note that if you fail to disclose relevant information to your insurer, such as holding additional relevant policies, you may risk your claim being denied.

Know your insurance, know your rights

When tailored to fit your needs and lifestyle, insurance through super can offer valuable peace-of-mind. This is why it’s important to have the right coverage in place so you are protected in the event you find yourself unable to work due to injury, illness or disability.

Our tips:

  1. Check the fine print to ensure you’re covered for what you think you are.
  2. Keep up-to-date on any changes that your policy holder makes to your insurances and ensure you update them when any circumstances in your life change.
  3. Seek legal advice if you need help. While you can lodge a claim for your insurance benefits yourself, the insurance industry is notorious for making the process difficult and have their own lawyers to provide advice on the best way to deal with your claim. There are a number of benefits to having a lawyer run your claim, but simply put, a lawyer can help you to understand your rights, access your full entitlements and receive them as quickly as possible.

Shine Lawyers – we’re here to help

If your ability to work has been impacted by illness, injury or disability, help is available.

Our team of Superannuation and Life Insurance claim experts can help you or your loved ones to understand your policy and assess your unique circumstances to advise exactly what you're entitled to. Our expert team will guide you through each step of the legal process on a No Win, No Fee basis and help you to seek your full entitlements and resolve your case as quickly as possible.

Getting started is easy with our Online Claim Checker below - a simple, free tool to help you check whether or not you have a valid claim, or you can call us today.


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Written by Shine Lawyers. Last modified: January 24, 2022.

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