Avoid the void by understanding how insurers treat each claim.
When you go to make a life insurance claim, the last thing you want is to be denied for something you could have avoided. Even worse, if you pass away, it could be your surviving family members who are left with a useless policy.
To avoid this happening, it helps to understand that not all denials are created equal. So let’s take a look at the different contexts in which insurers can void your claims.
Situations that will void any claim
Does drink driving and drug use void a life insurance claim? Yes, but there are a handful of other situations that will also void almost any claim that comes across the insurer’s desk. It is best to avoid the following at all costs:
- Drug and alcohol abuse. As mentioned, suffering injury or death as a direct result of drug or alcohol consumption is excluded.
- Providing faulty information. Providing inaccurate information during the application process, leading to a policy the insurer would have otherwise structured differently.
- Visiting a country with a travel advisory. Suffering injury or death in a country in which the Australian government has issued a travel advisory.
- Criminal activity. Suffering injury or death while engaging in criminal activity.
- Fraudulent claims. Attempting to defraud the insurer through a bogus claim. The insurer may also alert the authorities.
- Mental health conditions. Mood disorders including anxiety, depression and stress. This also includes drug and alcohol addiction and “sensitivity” conditions like fibromyalgia and chronic fatigue syndrome.
Situations that off-the-shelf policies won’t cover
Anyone can buy an off-the-shelf policy without having to answer a lengthy set of lifestyle questions. These policies are great for young, healthy people who don't partake in risky activities, but there’s a lot they won’t cover under any circumstances.
Unless you have a customised policy tailored to your lifestyle, you can expect to be denied for claims related to the following:
- A hazardous occupation. An occupation the insurer deems dangerous, including window washer, miner, heavy machinery operator and police officer. A complete list is usually listed in the PDS.
- A dangerous hobby. A hobby they insurer deems dangerous, including skydiving, scuba diving, auto racing and mountain climbing. A complete list is usually listed in the PDS.
Claims voided based on limitations
Both off-the-shelf and customised policies will have limitations that affect when and how you can make certain claims. The following limitations can void your claim if it doesn’t fit the criteria laid out in your policy:
- Pre-existing conditions. Every insurer has a different way of dealing with pre-existing conditions. Even off-the-shelf plans can have wildly different criteria. If you have a pre-existing condition, you’ll need to read the PDS carefully and speak to someone in person if you’re unsure.
- Waiting periods. Most policies have a waiting period between the time the policy kicks in and the time you are authorised to make a claim. The timeframe can differ based on what you are claiming for.
- Suicide or self-harm. Some policies will cover suicide or self-harm, but only after an extra-long waiting period and if it’s unexpected (eg a history of mental illness could void a claim involving suicide).
How to avoid a denied claim
Now that you understand how insurers treat the claims process, you can take the following steps to avoid having your claim denied:
- Identify your lifestyle factors. Make sure you understand the implications of your particular lifestyle. Knowing your risk factors ahead of time will help you avoid buying the wrong policy in the first place.
- Review your options. Be clear about the difference between an off-the-shelf policy and a customised one, and the way different insurers structure their policies. This will help you determine the best way to have your risk factors covered.
- Be upfront with the insurer. Make sure you accurately report your lifestyle circumstances to the insurer. Your claim could be voided if you provide incorrect or inaccurate information.
- Read the exclusions and limitations. You don’t want to get caught off-guard when something happens and you realise it’s too early to make a claim.
- Be civil. You don’t want to be denied (much less arrested) for reckless behavior like drink-driving or making fraudulent claims.