By Bryan Tucker 28 January 2021
This ex-clients wife contacted us to ask us to review their need for the life & total & permanent disablement (TPD) policy they'd had in place for many years. The TPD sum insured was $700,000. The premiums had grown to over $1,100 per month, and affordability was an issue given that he had developed Parkinson's Disease and had been forced to retire.
They had met with an adviser employed by the insurance company and checked the policy wording for a claim under the TPD part of the policy. The adviser decided that he didn't qualify. The older style policy had rigorous criteria to determine if someone was entirely and permanently disabled. They planned to cancel the policy, and so the insurance company employee gave them the cancellation forms required.
Before they proceeded to cancel the cover, they thought they would get independent advice from a Vesta adviser.
Bryan Tucker (Vesta) undertook a review and agreed that they had enough resources in place now that they could manage without the cover. They'd repaid all of their mortgages and had passive income that was more than sufficient to meet their living expenses. Bryan also confirmed that the existing policy wording did not allow for a TPD claim. However, he also noted that the policy had a premium cover benefit included that meant the insurer would waive his insurance premiums until the age of 65.
As a first stage, Bryan arranged for a premium waiver claim that ceased all further premiums on his cover. The client also received a refund of premiums paid since he had stopped working. As the client's wife was covered on a separate policy that wasn't covered by the premium waiver, we arranged for that policy's cancellation.
Bryan then set about working out if there was a way to get his TPD claim paid. While the old policy certainly didn't meet the criteria, he noticed that the insurance company's latest policy did have more flexible wording that might have made a claim possible.
Using a little known option available with that insurer, Bryan applied to have the client's policy converted to the new version. A conversion is a transfer internally that doesn't require the insured person to provide any health information. The cover is upgraded to better terms without the insured needing to disclose that his/her health had deteriorated since the policy was taken out. This option wasn't without its obstacles since he had recently had a birthday and was now above the maximum age for this option.
With some negotiation by the Vesta Adviser, the insurer agreed to make the transfer.
One week later, we submitted a claim for $700,000, and the insurer accepted it in full within 20 days.
Bryan also applied to the insurer for a financial advice fee to offset Vesta's fee for this service. Some newer insurance policies pay up to $2,500 towards a financial adviser's cost when a large claim is paid. This payment helps ensure that the recipients get some excellent advice about dealing with such large injections of cash. The insurer agreed and reimbursed the clients for the advice fee.
- Use independent insurance adviser's wherever possible - an employee of the insurer would have happily canceled the policy as requested
- Don't assume that a claim is impossible if you are told you don't meet the criteria - get independent advice
- Talk to an expert if you're getting nowhere with your adviser
- Personal insurance is a complex beast. There are many loopholes that an experienced adviser can help you through.
- Don't cancel a policy until all other avenues are exhausted