However, there has been an increase of questions around people having more than one life insurance policy and then claiming on them, especially with the recent release of the ASIC 498 report revealing a multitude of claims being declined. We’d like to put your minds at ease and have answered your most prevalent questions below.
Life insurance companies in Australia generally do not have any restrictions when it comes to purchasing multiple life insurance policies so long as the amount of cover can be justified and you have clearly disclosed all existing policy information, as well as when maintaining this cover in any subsequent application forms.
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The reason behind these offset clauses is to prevent you from taking out two policies and trying to claim on more than a 100% of your policy. The intention here is to provide you with a maximum benefit of 75% of your salary (pre-disablement income), because if you were to receive more than your salary, you would not be motivated to go back to work.
You can, however, have two Income Protection policies that have complimentary waiting and benefit periods. For example, you might have an Income Protection policy in your super fund (salary continuance) that has a 30 day waiting period and a two-year benefit period complimented by another Income Protection policy, this one with a two year wait period for which the benefit pays out until your 65th birthday
It’s important to note that each insurer has their own underwriting guidelines on the maximum level of cover they will offer for a policy, as well as the maximum sum insured of all policies held in one person’s life based on what their financial position can justify.
Justification is done by demonstrating to the underwriter (person reviewing your application) the person’s liabilities plus other financial obligations (i.e., kids) less your assets justify your collective sum insured of all the policies you currently have in place. The fact that you can afford the premiums doesn’t mean you can financially justify a higher level of cover.
The insurance application will ask you if you have any existing policies on your life. It is vital that you answer this question honestly and accurately. If you do not disclose this information your application might be denied or worse your future claim might be declined.
When claiming on more than one policy, you’ll need to complete a claim form for each company separately, and they will generally ask you to list every insurer you’re claiming from. However, if you have complied with the above, you shouldn’t have any issues with claiming on multiple life insurance policies.
For further clarification regarding claiming on multiple life insurance policies, we recommend you review the particular product disclosure statement of the multiple polices you are considering holding at the same timme. If you are still unsure about taking out a new or added policy, request a quote, and we’ll provide you the guidance you need.
Hi,
I have three superannuation funds, all with life cover included. – Colonial Mutual, REIV and REST
As I did not qualify for any other life insurance I have always thought that these would all pay out if I was to become deceased.
While discussing this with a friend recently, she intimated that my estate may only be able to receive proceeds from one of these.
Would love this clarified.
Hi Angela,
There is a huge misconception that you cannot have multiple life insurance policies in Australia however in general this is not true (excluding income protection – where this may be the case) however I would do two things to be certain.
Firstly I would contact your superfund, and ask them to explain and send you a copy of the latest PDS for that covers your life insurance cover and ask them to confirm if it would present a problem with you having multiple policies and ask them to highlight the pages that cover exclusions and limitations. While I did review one of the PDS’s which did allow for multiple policies it would be best for you to contact them each provider and confirm and to get a copy of the latest Product Disclosure Statement for your records.
Secondly group life insurance policies provided by superfunds are generally not guaranteed renewable which means that the REST, REIV or Colonial Mutual group policies terms and conditions can be downgraded at any time. Therefore while they may allow you to hold multiple policies today they may not in the future. Therefore you would want to review any alterations to the product terms and conditions as and when they happen or to review these on a yearly basis to ensure that they still allow you to have multiple policies at that time.
If you need further assistance please give us a call.
Hi, I have death cover with two superannuation funds. My understanding is that if I passed away my dependants or estate would be entitled to receive proceeds from both funds. However, the underwriter happens to be the same insurer for both funds – can this affect whether both are paid out?
Hi Cathy
Great question, in general where both polices have been fully underwritten and you have disclosed to the insurer / underwriter that you have multiple polices. They will generally both pay out.
However group policies are generally not underwritten at application time, therefore you will need to check the PDS / Policy Documents to ensure holding multiple death cover is permitted according to the policy of both funds. Most will allow you to but important to check.
Secondly important to note that group policies offered through superannuation funds are not Guaranteed Renewable contracts therefore from time to time the insurer may change the terms and conditions of the policy that could prohibit you from claiming on multiple death cover benefits in the future?