Poor life insurance terminology by superannuation funds is creating a false impression among clients that they will be covered in the event of an illness, says a risk adviser.
The comments by Suggars & Associates adviser Meike Suggars back up recent Zurich research which show Australians are 'mis-informed' about life insurance – and are either uninsured or 'mis-insured' as a result.
Ms Suggars said her clients are often misled to believe that the life insurance in their super fund will pay them in the event of illness.
“I think that’s because often a superannuation insurance statement will say that it includes terminal illness,” Ms Suggars said.
“But there is no further explanation in the statement as to what that means,” she said – adding that semantics and terminology are often at the heart of the confusion.
“It does worry me that the advertising you see on TV with no medical and no forms is misunderstood,” said Ms Suggars.
“The terminology used has a different meaning to the way those terms are used in ordinary language. People don’t understand the ins and outs of pre-existing conditions,” she said.
Ms Suggars said her clients usually need an example to help them understand what different policies will cover – such as how they might be covered if they had breast cancer.
“I think sometimes terminology could be a little bit clearer,” she said.
Zurich’s research proves how valuable life insurance advice is, Ms Suggars said – adding that by getting the right advice people will avoid being misinformed and therefore avoid underinsurance.
“We have a massive problem with underinsurance that is closely held with the idea of misinsurance where people have insurance of some kind, they just don’t understand what it does for them,” she said.
“That results in serious underinsurance because they think they are covered for things that they are not,” she said.
ASIC has revealed it was forced to take action on more than a dozen incidents of...
The government has flagged it may look at extending regulatory provisions for sc...
New data from Roy Morgan has shown despite overall superannuation fund satisfact...