Insurance 101: Understanding insurance documents

When you take out insurance there’s a fair bit of paperwork involved. So, just what are all those documents and are they really that important? 

The need for paperwork is kind of understandable when you consider that an insurance contract is just that – a contract. It’s a legally binding agreement between the policyholder and the insurer. And where legal matters are concerned, the paperwork is always important.   

So, just what are all those documents – and just how much do they matter? 

Application Form 

Let’s start with the form that starts off the process for taking out cover – the application form. This is the document you, as a prospective policyholder, fill in and give to the insurer so they have an understanding of your intentions for the property’s use. The form includes particulars about you and your property. Then we, the insurer, use the information you provide to assess the risk involved in insuring you and your property. It’s vital that the information you provide is complete and accurate. You have a duty to disclose any information that is relevant to the insurer’s decision whether to offer you cover. If you don’t disclose all the relevant information, or make a misrepresentation, it can impact any claim you may make or even render the contract void. 

Product Disclosure Statement (PDS) 

This one is SUPER important. It is a legal document that contains important information about your rights and obligations in relation to the insurance, including the cooling off period and the duty of disclosure. Your PDS tells you what you are and are not covered for under the specific policy. It highlights things such as your policy’s key features, insured events, covers, claim limits, exclusions, discounts, benefits, claims information and the insurer’s complaints handling procedures. It forms part of the issuing documents you receive when you purchase a policy. The PDS is a must-read document that helps you to determine if a policy suits your objectives, financial situation and the needs of your property. 

Financial Services Guide (FSG) 

The FSG is designed to help you make an informed decision about whether to take out cover with us. It includes details about the financial services we are able to provide to you, the remuneration that may be paid to us and other relevant persons for providing those services, associations or relationships we may have, and how any complaints are handled. It also includes details of our professional indemnity insurance. Basically, the FSG explains who you are dealing with – and that information is important for you to have.    

Target Market Determination (TMD) 

The TMD explains who the specific insurance product may be suitable for, as well as aspects of the policy which may make the insurance unsuitable for some customers. The TMD provides a product description and outlines the key attributes of the policy. It also sets out the eligibility criteria for the cover, that is, for whom the product is suitable and for whom the product is not suitable. This covers things like who owns the property, where it is located, how it is used/leased, the type of building, and the condition of the premises. The TMD also sets out key exclusions and limitations.  

Cover Summary 

The cover summary, insurance policy schedule or certificate of insurance, is the outline of the coverage provided by your insurance policy – it contains information specific to you. It’s the part of the insurance contract that identifies the policyholder and details the property and persons covered (what you are insuring), the period of insurance, what sections of the policy are insured, the amount of coverage, sums insured, level of coverage, the exclusions, the excesses, and the payment mode and schedule. It will also include the answers you gave to the insurer’s questions when you applied for the policy. It may also include other key coverage information like additional clauses, warranties and conditions that are specific to your policy (that is, modifications to the base policy wording). Although the cover summary sets out the key information most policyholders need to know, it’s not a standalone document and must be read in conjunction with the actual PDS.  

Renewal 

In most cases, once you have secured an insurance policy, you will be offered the opportunity to renew it once it approaches expiry (usually 12 months after it comes into effect). The renewal proposal will detail your premium, excesses, and coverage amounts. For example, your building coverage may change if construction costs increase and make it more expensive to rebuild after an insured event. In many cases, the insurer indexes the sums insured based on CPI, but this may not be adequate to cover the real increase in costs, making it imperative that you review the sums insured and ensure they are appropriate for your property.  

It’s also incredibly important that you read the renewal proposal as there may have been changes (to terms and coverages) made to the PDS since the policy was taken out. While the insurance may auto-renew, it’s still your responsibility to review the documentation to ensure you understand what you are and are not covered for, as well as all the relevant terms and conditions, to make sure the policy still meets your needs. 

To summarise 

We understand that it may be tempting to ignore all that paperwork – we know it may not seem a scintillating read! But it’s important that you do read and understand those documents before you take out or renew an insurance policy. It’s in your best interests to familiarise yourself with your insurance cover so you know what you are and aren’t covered for (which ultimately helps to ensure there’s less chance of unwelcome ‘surprises’ down the track – especially at claim time).  

If you have any questions about the documents, a member of our Expert Care team will be happy to assist you – 1800 661 662.