Have you ever wondered how many times you can claim on a personal insurance policy?
When you take out a personal insurance policy through Sapience Financial, whether it's to protect your life, your income, or a serious illness – you're doing so with the peace of mind it will be there for you if you need to make a claim.
But have you ever wondered what happens after a claim is paid? Does your policy simply vanish, or can it continue to offer protection?
Read in this article
Different types of personal insurance policies end at different times
This is an important, but often overlooked aspect of insurance: understanding the different 'claim payouts and policy termination scenarios.'
- The way your claim is paid can significantly impact the future of your policy, and knowing these nuances can help you make a better decisions about your insurance cover.
Let's break down three common scenarios.
- Single Claim One-and-Done – One Off Lump Sum Payout of the insured amount, then the policy closes.
- Multiple Claim Ongoing Support – Partial & Full Sum Payouts up to the full insured amount, then the policy closes.
- Income Support Flexible Income Solutions – Multiple Partial & Full Sum Payouts, and policy continues until the insured length of time (eg: till age 65)
Every personal insurance policy is for a specific insured full amount.
Different types of policies are designed to payout once or multiple times, depending upon the type of policy you choose.
Single Claim policies
Some policies are designed to make a single claim payout of the full insured amount.
For example: if you have a $500,000 Life policy and pass away or become terminally ill, the $500,000 is paid out.
Then the policy closes.
Multiple Claim policies
Some more flexible policies are designed to payout partial and full claims up to the full insured amount.
For example: if you have a $600,000 Crisis policy and are diagnosed with early stage breast cancer you might get a $300,000 partial payout first and then the remainder of the insured amount upon a claim for a subsequent heart attack two years later.
Then the policy closes.
Income Support policies
Income Protection policies different in that they payout for the length of time agreed to by the policy.
For example: if you have an income protection policy till age 65 you can make multiple claims and receive up to 70% of your income paid until age 65.
Then the policy closes @ age 65.
Life Insurance Payout Structures: Explained by Product Type
One-and-Done (Lump Sum) Policies
| Feature | Details |
|---|---|
| Policy Types (Primary Benefit) | Standard Life Cover, Lump Sum TPD, Most Trauma Policies. |
| Payout Trigger | Meets policy's specified event (e.g., death, TPD, trauma). |
| Policy Status | Policy closes after the single payout. |
| Typical Use Cases |
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| Pros |
|
| Cons |
|
| Analogy | Winning the lottery (one big payout). |
| Example Policy | Standard Life Cover, TPD Lump Sum, Trauma Cover (most types) |
Ongoing Support (Partial & Full Payouts) Policies
| Feature | Details |
|---|---|
| Policy Types (Primary Benefit) | Severity-Based Trauma/Crisis, Some TPD Policies with Partial Benefits. |
| Payout Trigger | Meets policy's specified event, with the option for ongoing claims. |
| Policy Status | Policy closes after the full insured amount is paid out (via partials/fulls). |
| Typical Use Cases |
|
| Pros |
|
| Cons |
|
| Analogy | A credit line you draw from until it's empty. |
| Example Policy | Some TPD or Trauma policies with "severity-based" or "partial benefit" clauses. |
Flexible Income Solutions (Multiple Payouts) Policies
| Feature | Details |
|---|---|
| Policy Types (Primary Benefit) | Income Protection Insurance, Business Expenses Insurance. |
| Payout Trigger | Meets policy's specified event, with payments structured over time. |
| Policy Status | Policy continues until the insured length of time (e.g., age 65), even after multiple payouts. |
| Typical Use Cases |
|
| Pros |
|
| Cons |
|
| Analogy | Receiving a regular salary or pension. |
Important Note: The most common reason for any policy to end prematurely is the non-payment of premiums. Always refer to your specific Product Disclosure Statement (PDS) for the exact definitions, exclusions, and benefit limits applicable to your policy.
Use a specialist Risk Advisor
If this sounds a little overwhelming, that's why you need a specialist Risk Advisor from Sapience Financial to help you safely chart the waters.
FAQ's
Your Personal Insurance Claims Questions, Answered. Here’s a quick summary of what you need to know about understanding personal insurance claims.
Can I claim on my personal insurance more than once?
It really depends on what type of insurance you have. Some policies are a "one and done" deal, while others are more flexible and allow for multiple claims.
What's the deal with 'single claim' policies?
Think of these like a one-time safety net. Policies like standard life insurance or most crisis/trauma insurance plans are designed to pay out the full amount once, and then the policy ends. It’s for a major event, and once you've used it, the policy has done its job.
You mentioned some policies allow multiple claims. How do those work again?
These are policies that offer a bit more flexibility. For example, some modern crisis/trauma policies are 'severity-based'. This means you might get a partial payment for a less severe illness, and you can still claim the rest later if something more serious happens. You can keep claiming until you've used up the total amount you're insured for.
What about Income Protection? Can I claim on that more than once?
Yes, absolutely! Income protection is designed to be used as many times as you need it, up until the end date of your policy (which is often when you turn 65). So, if you're unable to work for a while, you can claim, and then if it happens again down the track, you can claim again
Does making a claim mean my policy is automatically cancelled?
Not necessarily! With policies like income protection or the more flexible trauma policies, your cover continues even after you've made a claim. The only time a policy typically closes is when the full insured amount has been paid out, as is the case with single claim policies.
Sources & Further Reading
- Moneysmart: Income Protection Insurance - The Australian Government's official guide explaining how income protection provides ongoing payments if you're unable to work.
- Moneysmart: Trauma Insurance - An overview of how trauma (or critical illness) cover works, typically providing a one-off lump sum payment.
- Moneysmart: How Life Insurance Works - A comprehensive portal explaining the different types of personal insurance, including Life cover and TPD insurance.
- Australian Financial Complaints Authority (AFCA) - The official, independent body for resolving complaints and disputes with Australian financial firms, including insurers.
Call us today on 1300 137 403 or email us here for a no-obligation private chat about your situation.
Drew Browne is a specialty Financial Risk Advisor working with Small Business Owners & their Families, Dual Income Professional Couples, and diverse families. He's an award-winning writer, speaker, financial adviser and business strategy mentor. His business Sapience Financial Group is committed to using business solutions for good in the community. In 2015 he was certified as a B Corp., and in 2017 was recognised in the inaugural Australian National Businesses of Tomorrow Awards. Today he advises Small Business Owners and their families, on how to protect themselves, from their businesses. He writes for successful Small Business Owners and Industry publications. You can read his Modern Small Business Leadership Blog here. You can connect with him on LinkedIn. Any information provided is general advice only and we have not considered your personal circumstances. Before making any decision on the basis of this advice you should consider if the advice is appropriate for you based on your particular circumstance.
