Know Risk is a community education program designed by the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) to improve our understanding of insurance and how it relates to managing the many risks we all face in life.
What a PDS is and why you should read it when buying insurance
Understanding one of the most important documents you will ever have
You may not be familiar with what a PDS is but you might have heard it in passing when you’ve been looking into insurance. If you have any kind of insurance policy in place, then you will have been sent a PDS, or Product Disclosure Statement, by your insurance company, so you may have actually had some interaction with a PDS even if you aren’t actually aware of what it is or even if you aren’t sure why it’s important.
Let’s break things down and investigate the purpose and benefits of a PDS in further detail.
What is it?
A PDS goes into detail about the terms and conditions of your policy, and is designed to provide adequate protection to both you and your insurer.
A PDS is usually a single document that insurers in Australia are legally required to give to their customers before an insurance policy is purchased. If you purchase your insurance online, you will be able to find the PDS on the insurance company’s website.
Why should I read it?
Although it might be tempting to tell yourself you’ll read the PDS later, or even just dismiss it completely, it’s really important that you not only hang on it, but that you make a point of reading it as soon as you can after it’s been issued to you (or online before you actually enter into an insurance contract).
When you’re shopping around for insurance and you have multiple PDSes from multiple prospective insurers, it will obviously be time-consuming to read each one, but it’s so important that you do — both as a tool to compare them (so you can determine which insurer’s policy is the right one for you) and so that you know the ins and outs of any policy you purchase.
Reading through a PDS will help you understand the finer details of what kinds of things a prospective policy will cover, as well as what is not covered and under what kinds of circumstances a claim will be denied. Without knowing these things, it’s possible you may purchase an insurance policy that isn’t actually right for you and that doesn’t cover the types of things that motivated you to get insurance in the first place.
What are important things I should be looking for in a PDS?
While you should always read a PDS in its entirety, some of the things you should be looking out for include:
- Coverage — this not only includes what things/items are and are not covered, but also under what circumstances you are and aren’t covered
- Limits and exclusions — this will include any monetary limits on items that are covered, as well as things that your policy doesn’t provide any coverage for
- Cooling-off period — this is the amount of time (usually between 14 and 21 days) you have to cancel your policy if you are unhappy with it or change your mind.
- Claims — the PDS will outline how to go about making a claim and what sorts of documentation and evidence will be required as part of the claim process. Any excesses that will need to be paid in order for a claim to be processed will also be listed.
- Definitions — the PDS will define all of the relevant technical terms related to a policy to help you better understand your policy, as well as clear up any confusion about terms that may have multiple definitions.
- Terms and conditions — this will detail the types of things that will void your policy, as well as what information you need to be forthcoming with your insurer about.
- Complaints process — the PDS will include information on how to make an informal or formal complaint in the event you are unhappy with the insurance product or service.
- Cancellation — the PDS will detail how to go about cancelling your policy beyond the cooling-off period and the implications of any such cancellation.
What can I do if I don’t really understand the content of a PDS?
You might actually be surprised about the extent to which plain English is used in a PDS, so there’s a good chance you will understand its content without guidance. But, of course, some insurance types are more complicated than others, which means that some PDSes will also be more complicated than others.
If you’re confused about any of the phrasing or terms and conditions outlined in a PDS, then make sure you follow up with your insurer as soon as you can. Your insurance company is there to help you and it will benefit both you and them if everyone is clear on the details.
Doing so will help ensure that you have a much clearer picture of which circumstances you are covered for and which circumstances aren’t covered by a prospective policy. Following up on things that you are unsure about will also help limit any surprises in the event you need to make a claim — and, let’s be real, surprises are fun on many occasions, but certainly not when it comes to insurance claims.