I have mentioned this before; banks are good at looking after your money and giving you ways to spend it. They are not so good about helping you out of debt or giving you insurance advice. This is especially so at the teller level, which is where a lot of bank cover is sold rather than advised.

For example, 'Thanks, Mr. Smith. We've got your banking sorted. Would you like insurance with that?'

You have heard it before, possibly not the best thing for you.

I call it the fries approach

A client, Mrs Jones, is in the bank one day doing her banking and gets asked the 'fries' question and signs up for life cover. The teller asks if you had a heart attack or got cancer would you like some of that money early? Mrs Jones says why yes, and also takes some additional trauma cover.

Sometime later, 5-6 years, Mrs Jones goes in for open-heart surgery to repair a heart valve that has been diagnosed. She gets through that and submits a claim on her trauma policy for the open-heart surgery. The insurance company behind the policy declined the claim, as the policy does not cover the condition she has had treatment for.

In this particular case, the insurance company is right, the policy did not cover the condition Mrs Jones had. What Mrs Jones did not know or realise, is she has a basic trauma cover. Not the comprehensive trauma option that would have covered her surgery. The comprehensive option was available to be used at the time with the bank, but the teller sold her the basic one.

You could argue that some cover is better than no cover, but in this case, Mrs Jones has had open-heart surgery that she expected to be covered for. The advice issue then becomes did the bank give her the option to take the more comprehensive cover?

With 20/20 hindsight, given the option, Mrs Jones would have taken the comprehensive option. At the time, it would have been about 8% more expensive, which was well within affordability for Mrs Jones.

If budget was a concern, in the context of things, it could have been $92,000 of comprehensive cover vs $100,000 of basic cover for the same premium. Hmm, if it were a $92,000 claim if it were a basic cover condition or $0 if it is a comprehensive cover condition, which would you choose?

Losing $8,000 or gaining $92,000?

The real issue is Mrs Jones did not get the choice. Because bank teller sales are low-advice, there is low disclosure and less information for you as a client to make a decision on. With bank sales focused on moving policies, often they are cut-down versions of what you would get from an adviser.

The other issue with bank or short-form applications is that there are fewer questions on the application form, but they are more open questions. This leaves you open to under or non-disclosing on your application form.

I have seen bank application forms with as few as 3 questions but typically 5 medical-related questions on them. For you as the consumer, they leave you open to a claim being declined due to not fully disclosing your medical history.

For example, a common medical question in a simple application.

Have you ever had, suffered from or been diagnosed with a medical condition?

Hmm, how long of a story are you going to write? They give you 4-5 lines to answer, which restrict you to what you can fit in the space.

The reality is the more serious conditions are listed, but the ones that can cause future issues are not. From experience, very few people can fit their complete medical history into 4-5 lines, so this short-form approach creates disclosure issues for you as a client by default.

I have had one client come to me where they had completed one of these short-form applications; they answered the question as asked. What they missed was the obvious issue, the chemotherapy they were about to start.

Why? Because there was not the space to write it in and the way the question was worded, the client could interpret that this was not asked for, as the treatment had not yet started.

This is non-disclosure in the insurance company's eyes and difficult to argue in court if you have to claim.

So, you have cover from your bank and you want to make sure it works?

Talk to an adviser, preferably us, but talk to someone who knows intimately about this area. Yes, it is often the one thing people shelve or put off, but when it comes to the crunch, you need to be able to rely on your insurance coverage to work.

Get in touch; we can help. We do find clients with good cover, and we tell them so, but we more often find clients with cover that is not going to deliver what they really want. Knowing this gets them taking action to be in a better position. Interestingly, it is not always at more cost; we find it is often less cost when what they need and want is considered when we put it in place.

A recent client we worked with was spending $1,100 per month on their coverage. By working through the options, we have significantly strengthened their coverage, increasing coverage in some areas, and reducing their overall premiums by 40-45%. This is without removing the type and level of coverage they already had.

Another older client struggling with premiums and making decisions, by implementing effective estate planning we were able to reduce their requirements and save them $1,800 per month on their insurance premiums. This one was with a reduction in cover because we could help with mitigating the need for it.

If these are the sorts of results you are looking for with your own insurance, get in touch.