We’re under no allusions that an insurance PDS is a scintillating read, but it is in your best interests to give it a careful once-over – here’s why…
We know that a Product Disclosure Statement (PDS) is never going to make the ‘best reads’ list, but there’s no denying it’s a document that you ‘must read’ before taking out an insurance policy.
Any advertisement that mentions an insurance product will include a disclaimer encouraging you to read the PDS. That’s because all insurance policies are legally binding contracts governed by terms and conditions. Together these documents make up the insurance contract and set out the contractual rights and obligations of both the insurer and you, the policyholder.
However, it’s in the PDS where you’ll find all the information you need to make an informed decision as to whether the policy is the right product for your circumstances. The intention of the PDS is to highlight main exclusions and areas of cover in the policy. This helps policyholders identify any areas of concern without having to do an expert review of the policy wording.
Word to the wise: The information provided in a PDS does not take in to account your individual needs or financial situation. You should consider whether a policy offers cover that is right for you before deciding.
Not convinced it’s worth the effort? Here are five reasons why you should read your PDS:
A PDS outlines what is covered
You take out insurance to safeguard against certain risks, so you need to know that the risks you need covered are included. Assuming something will be covered is fraught with danger. The PDS will detail what events are included in the policy (e.g. insured events) – and under what circumstances. This is important as there may be restrictions on the cover.
A PDS also outlines what isn’t covered
Just as importantly, you need to know what your policy doesn’t cover (the exclusions). Again, assuming something will be covered could result in a nasty surprise at claim time. For example, flood cover is often excluded (not in EBM RentCover policies though – it’s a standard inclusion!). Knowing what losses aren’t covered and under what circumstances makes claiming easier. As an example, fire damage is usually only covered when the damage occurred under certain conditions and not others (e.g. burning as a result of flames is covered but scorching without flame generally isn’t).
A PDS helps you better understand cover
The PDS will define all the relevant technical terms to help you better understand your policy, and clear up any confusion about terms that may have multiple definitions. It’s really important to understand what an insurer means when they use a particular term, as the definitions are not universal. For example, prior to July 2014, there was no standard definition of “flood” and insurers defined it differently causing great confusion among policyholders. “Damage by animals” and “actions of the sea” are also common terms that are defined differently – and given many insurers have exclusions relating to these matters, it’s a good idea to understand how yours defines them.
A PDS explains what can void your policy
As part of the contract you enter in to with the insurer, you have to meet certain obligations to retain cover. So you need to understand any circumstances that could void your policy, for example if you fail to maintain the premises or fail to act to prevent further loss. You also need to be aware of what you need to tell your insurer when things change and present an increased risk to the insurer (it’s referred to as disclosure), for example that the premises are vacant, so they can determine if they will continue to cover you.
A PDS guides you through how to make a claim
The PDS tells you how your insurer will respond if you suffer a loss covered by the policy and need to make a claim. It will outline the conditions (e.g. how long you might have to put in a claim) and steps necessary to make a claim against the policy (e.g. who to contact to make a claim), as well as what documentation or evidence you might need to support your claim (e.g. a report from the repairer, police report, inspection report, rent ledger). If you don’t want to risk potentially prejudicing your claim, it is important to follow the steps provided in the PDS so you are in accordance with the insurer’s requirements.
The PDS will also set out the complaints process if you are unhappy with the insurance product or service. Heads up: If the PDS doesn’t have the complaints info, the Financial Services Guide (which is designed to tell you more about the financial service provider e.g. insurer) will.
Okay, we know that the PDS can run into dozens of pages and the words can seem a bit monotonous, but making the effort to read the document is in your best interests. A PDS is written in plain English and your insurance broker or the insurance provider is available to explain anything you don’t understand. Choosing the wrong policy, because you haven’t read the PDS, can prove costly at claims time. So don’t run the risk of being under insured or inappropriately insured – read and make sure you understand the PDS before you purchase the insurance product.