If you were one of the 1,200 customers who purchased funeral insurance from Insuranceline, you could be due a refund.
Life insurance company TAL Direct is set to issue refunds totalling $900,000 to customers who purchased The Over 50s Insurance Plan, The Over 55s Insurance Plan and the Insuranceline Funeral Plan (version 2) between July 2003 and June 2013.
The firm failed to switch off annual cost of living increases to premiums and cover after customers reached the age of 75 and 80 for the Over 50s/55 Insurance Plans and Insuranceline Funeral Plans respectively. The company recently reported its error to the Australian Securities and Investments Commission, which said TAL had agreed to put the situation right for customers.
The net affect of TAL’s error in not complying with its policy obligations was that 1,200 customers were overcharged on their premiums. Eligible customers are now being offered the choice of a refund of the portion of premiums paid for the annual cost of living increases after the relevant ages, or to maintain the higher level of cover and higher premiums with no refund. TAL will also refund affected policy holders whose policies have lapsed.
“Customers should be confident that they are not being overcharged for their insurance, and insurers should have safeguards in place to prevent this,” ASIC deputy chair Peter Kell said in a statement. “When an overcharging error is identified, the insurer should act quickly to rectify the problem.” ASIC noted that TAL had been cooperative in its reporting and handling of the issue.
While TAL will contact all affected policy holders over the next few months to discuss their options, you can call TAL directly on 1300 303 781 if you think you may have been impacted.
The government’s MoneySmart website notes that funeral insurance premiums “tend to rise steeply for people over 50 and this can cause people to cancel their policy in the first few years, losing the benefit of premiums already paid.”
MoneySmart also urges consumers to be wary of funeral insurance and check if it’s worth the money – specifically, consider whether will you be paying more for the insurance than the funeral will actually cost. Have you considered other options you might have for paying for a funeral?
It may very well be more cost effective to work out how much you think you’ll need for your funeral, and put the money you would have otherwise paid in premiums into an interest-bearing savings account.
Financial comparison site Canstar also notes some of the traps of funeral insurance, suggesting that not everyone needs this type of insurance because it may already be included in a life insurance policy or government benefits. It’s worth checking all of your financial policies to be clear about what is and is not covered in each.
Canstar also noted that the average funeral costs between $11,000 and $19,000 and the typical funeral insurance policy covers up to $15,000. It cited research which found that just one in ten funeral insurance policy holders were covered for more than $15,000 in 2013. So while some people may be paying more in premiums than they may need, others may not be covering the possible cost of their funeral despite their intention to do so.
As with any insurance decisions, it’s worth speaking with your financial adviser to determine the appropriate level of cover or alternative options for your situation.