Have you noticed at the end of an advertisement, an insurance company will advise you to read a copy of the Product Disclosure Statement before considering their product? This begs the question; what is a Product Disclosure Statement?
What is a PDS?
A PDS or Product Disclosure Statement is a legally binding contract which contains information about the financial product you are considering. Product Disclosure Statements set the terms and conditions for what the insurance company will agree to compensate you for after an unforeseen event. Depending on the event and the policy wording, this can also mean less compensation than what was expected or even nothing at all. The PDS includes benefits, risks, conditions, restrictions, exclusions and more.
What is the Purpose of a Product Disclosure Statement?
A Product Disclosure Statement is specifically created in order to help consumers better understand the particulars of a financial product that they are considering engaging with.
This is why you see the clear PDS notice displayed on an insurance advertisement, to encourage you to look at the PDS. This is done so that you can better understand what you’re involving your finances in, along with any associated risks.
A PDS is, essentially; a document that aims to arm potential customers with the knowledge to make an informed financial decision.
What Does a Product Disclosure Statement Include?
An Australian PDS must include information regarding the following:
- inherent risks associated with a specific financial product
- potential benefits to the product
- key features of the financial product
- costs related to the product
- the complaints handling procedure of said product
What you Need to Know About Product Disclosure Statements
Australian law requires insurers to include all the terms and conditions of the insurance product in the Product Disclosure Statement (PDS). Information provided in a PDS does not take into account your individual needs or financial situation. You should consider whether a policy offers cover that is right for you before making a decision. Insurance industry PDSs may run to dozens of pages, however, reading the PDS will help you compare and make an informed choice about the policy. The PDS should also provide you with all the information that tells you how your insurer will respond if you incur a loss covered by the policy and need to make a claim.
Why Product Disclosure Statements are Important:
Policy schedules and certificates of insurance do not contain the entire terms and conditions of your policy. Often, these are the only documents which are viewed and sited, leaving purchasers open to potential issues for not having read and understood the terms and conditions within the PDS.
Reading and understanding the PDS before you engage in an insurance policy is instrumental in saving you from any potential surprises further down the line.
When purchasing directly with an insurance company, the responsibility lies with he purchaser to ensure the product is right for them. When sourcing insurance through a Qualified Advisor (Insurance Broker), you are relying on their extensive knowledge, experience and expertise to navigate through these documents. With their help, you can better understand the PDSs provided to you, helping you to make a decision that best suits your needs.
An Insurance Broker is responsible for ensuring that they are sourcing the most suitable product for your needs. This claim management service can prove to be valuable come claim time, especially if there are some ambiguities to how something is defined in the PDS.
Sources
http://understandinsurance.com.au/understand-your-insurance-policy
https://moneysmart.gov.au/glossary/product-disclosure-statement-pds
