Originally Published on 5 August 2020
“I do appreciate your help over the last six months.”
It comes as no surprise that Australians are taking a close look at the amount they are paying in insurance premiums in these uncertain times.
That was the case in September 2019 when Mason and Ava [names changed to protect client privacy] were reviewing their household budget.
Mason contacted AFRM concerned about how much he was paying in premiums on his two policies. He had a Multi-Risk Term Life policy that provided Income Protection (IP), Life, Total and Permanent Disability (TPD) and Trauma cover and a second Term Life policy with TPD.
Mason became concerned when his total monthly premiums increased by almost $500 over the previous year, taking his monthly total premium payments to almost $2800.
The definitions and benefits of both policies were significant. Both policies offered in excess of $1 million to beneficiaries in the event of his death, both policies offered almost $700,000 in the event of TPD, he was also entitled to up to almost $700,000 for Trauma under his multi-risk policy and he also had agreed value IP cover offering a benefit of up to almost $11,000 per month.
Nevertheless, Ava was concerned at the significant proportion of Mason’s income that was going towards paying insurance premiums.
AFRM adviser, Sam Brennan, called Mason to discuss his concerns and explained that based on like-for-like comparisons, the levels of cover provided by his policies was reasonably priced and sat around the middle of the market.
As is often the case in such situations, Mason said he and Ava had searched online and found life insurance products that were much cheaper than the premiums he was currently paying.
Sam explained that any consideration of a policy must include a close examination of the definitions within each policy to ensure you are comparing “apples with apples.” Sam offered to provide Mason and Ava with a comparison and assessment of the cheaper products they had seen online if they would provide the details.
Sam and Mason met to examine all relevant issues and the potential impacts of making major reductions in his level of cover to dramatically reduce his premiums. Sam suggested they analyse Mason’s current life situation, risks, desired outcomes and see what adjustments may be needed.
The meeting concluded with Mason’s commitment to discuss in more detail with Ava the family’s future financial requirements. However, he did ask that all premium payments be put on hold until such time as they had made a decision on their way forward.
Significantly, while Mason believed he was in fine health, he agreed with Sam’s suggestion of getting a full medical check done prior to making significant reductions to his cover.
About a month later, Mason emailed Sam to say he wanted to cancel his second policy and reduce his original premium to about half of what he is currently paying. Mason said he’d like to keep his IP cover as protection in the event of disability, and that he’d like to reduce his Death, TPD and Trauma benefit to just $250,000.
Sam committed to determining what the premium levels would be the for requested new levels of cover and to share those costs with Mason ASAP.
When Mason next spoke to Sam, he advised that he had gone ahead and had the medical check-up. That check-up had resulted in Mason being referred for a prostate biopsy. It was now mid-December 2019.
By Christmas Eve 2019, Mason had advised AFRM he had been diagnosed with Prostate Cancer and would require surgical removal (via a radical prostatectomy).
On the same day AFRM researched the potential claims that could be made under the terms of Mason’s existing policies and called him to explain the claims process and to advise what information would be required to file valid claims.
Sam also recommended that Mason pay the outstanding premiums – given the payments had been put on hold – to avoid the risk of either policy formally lapsing.
AFRM supported Mason through the claims process and by 12 February 2020, Sam was able to inform Mason that he had been awarded a payment of $692,000 under his Trauma cover plus a Financial Planning Benefit payment of $3000 and also further funds under his IP cover, taking the total payment to almost $770,000.
When Sam called to let him know, Mason expressed his gratitude for all of AFRM’s work, saying:
“I do appreciate your help over the last six months.”
Mason also commented that AFRM’s support during the claim period had made the entire experience much less stressful than it could have been.
During a call in March 2020, Mason reported that he was back at work and doing well. Following a successful claim and improved financial position, Mason and Sam are now working through the required reductions to his cover.
A factor that Mason had not considered until it was raised by Sam was that if he cancelled any of his cover now, he would be unlikely to secure a new policy at any point in the future on as favourable terms as he currently held.
Sam believes there are several clear messages to be learned from this case study.
“It’s crucial to speak with your adviser if you are considering changes to your policies,” Sam said.
“In this case, a check-up with his doctor before reducing adjusting cover was the difference between a successful claim and a potential loss or significant reduction in benefits. I’m glad we were able to help in a stressful time for Mason and his family.”