Life, TPD, Income Replacement and Trauma Insurance

Life cover – also known as term life insurance or death cover, pays a set amount of money when the insured person dies. The money will go to the people you nominate as beneficiaries on your policy.

Total and permanent disability (TPD) cover – covers the costs of rehabilitation, debt repayments and the future cost of living if you are totally and permanently disabled. TPD cover is often bundled together with life cover.

Income protection – replaces the income lost through your inability to work due to injury or sickness.

Trauma cover – provides cover if you are diagnosed with a specified illness or injury. These policies include the major illnesses or injuries that will make a significant impact on a person’s life, such as cancer or a stroke. It is also referred to as ‘critical illness’ cover or ‘recovery’ insurance.

Settlement

Most non-contentious matters settle by negotiation without need for litigation proceedings in a court.  Equally, it may take some time to diagnose some illnesses and how they impact a worker.

Claims Procedure – Overview

As life insurance claims are based in contract, rather than negligence, each insurer will have its own way of handling claims.  Speaking hypothetically, the insured will notify a claim by telephone then be sent a claim form and a form for a doctor to complete in order to formally make the claim.

Internal Dispute Resolution (IDR)

If the insured is unhappy with the insurer such as for claims refusal (in part, or whole) then there is usually a right for this decision to be internally reviewed, with or without new evidence in support of the claim.  IDR does not incur an expense to the insured.

Financial Ombudsman Service Ltd (FOS)

The FOS is not governement, but rather a public company which is ASIC approved for external dispute resolution in the financial industry, including insurance, banking and financial advice.  If the insured remains unhappy with the insurer’s decision then after 45 days after notice of dispute, a complaint to the FOS may be lodged.  Again, a FOS complaint does not attract a lodgment fee.

Utmost Good Faith

In contrast with other contracts, both insured and insurer must act with the utmost of good faith toward each other concerning insurance contracts (policies).  It is an often misunderstood but very important concept.

The insured must cooperate with the insurer and, in particular must provide the insurer with copies of reports and other relevant material in the insured’s possession and also comply with any reasonable request by the insurer to undergo, at the insurer’s expense a medical examination by a doctor selected by it.

Equally, the insurer must cooperate with a insured and, in particular must provide the insured with copies of reports and other relevant material in the insurer’s possession.

A claimant or insurer is not obliged to disclose information or documentary material if the information or documentary material is protected by legal professional privilege.

Within a reasonable time after the claim is formally made, the insurer must take reasonable steps to inform itself of the circumstances of the claim.  It must give the claimant written notice stating whether liability is admitted or denied; and if denied, on what basis.

Duty of Disclosure

This duty is a product of the Utmost Good Faith overall one.  The insured should broadly speaking, disclose all one knows or ought to know as relevant to the insurer’s decision to accept the policy (and on what terms).

Litigation

Before the claimant brings an action in a court for life insurance a proper attempt alternative dispute resolution (ADR) should be made.

Either party may for example call for a mediation before a suitably experienced and senior counsel to see if some meeting of the minds can be negotiated.  However, if there is an impasse, litigatin proceedings in a court of law may be a logical next step for the insured.

Source: Insurance Contracts Act 1984