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Insurance Product Disclosure Statement (PDS) Explained
Imagine you’ve just signed up for a new insurance policy, then a thick Product Disclosure Statement (PDS) lands in your inbox. You start flipping through pages of tiny texts, legal terms, and seemingly endless clauses.
Overwhelming... right?
Overwhelming... right?
So, you’re just tempted to skim it or toss it aside.
But remember this: the PDS is an important document.
Why? Because it spells out what your insurance covers. However, it is unfortunately often a puzzle for many.
According to the Insurance Council of Australia (ICA), most policyholders do not access their PDS. Meanwhile, based on the 2025 Under the Hood Report, only around 58% of car insurance policyholders have read their policy’s PDS, be it in full or in part.
Let’s be real.
The lack of complete understanding about what your policy covers can lead to unpleasant surprises when it’s time to make a claim.
Let's set the record straight for you so you understand what a PDS is.
The Hidden Language of Insurance
Admittedly, the PDS isn’t just a light reading. It’s full of complex legal jargon, clauses, and fine print. But why make it so tricky? Insurers use precise language to protect themselves, but that often makes it hard for the average person to grasp.
Let’s look at some commonly misunderstood terms:
- Exclusions: These refer to situations your policy won’t cover. For example, you might assume a ‘wear and tear’ on your car is included, but it’s not.
- Limitations: These are caps on the compensation you receive. Say, your policy has a $1,000 limit for stolen jewelry. This means that you will only receive $1,000 even if your ring is worth more than that.
- Definition of Events: Simply, ‘events’ refer to any unexpected accident that causes you loss or damage, and is covered by your insurance policy. For instance, the policy you have might define ‘flood’ as river overflow but not stormwater runoff.
Picture this: you’re a small business owner in Sydney. You thought that your Business Insurance covers all water-related damages. When a storm caused a flood that damaged your shop, your claim was denied since your PDS excluded ‘stormwater damage’. As a result, you’re left with no choice but to shoulder all the repair expenses.
Misunderstanding your PDS can really cost a lot, but there are ways to get ahead of these surprises.
Cyber Liability Insurance is designed to help protect you from claims and support your profitability in the event of a cyber breach or attack.
Public Liability insurance is there to provide protection if someone makes a claim against the insured, the business or its employees.
A business insurance pack can provide cover for your business premises and contents, against loss, damage, theft or financial loss from an insured interruption to the business.
Misunderstanding your PDS can really cost a lot, but there are ways to get ahead of these surprises.
QUESTIONS? JUST ASK
Marel Pencev
Key Sections of a PDS to Scrutinise
A PDS follows a standard structure, but knowing where to look can make all the difference. Here are the things you should focus on and some tips on what you have to watch out for:
- What’s Covered: Don’t skip on checking what your coverage includes. See if it matches your needs. If you have a home insurance policy, look if it includes fire, theft, and natural disasters like tropical cyclones. Remember to always ask if your policy covers the risks you’re most worried about.
- What’s Not Covered (Exclusions): Stay alert for what your policy does not cover, such as a specific water damage. Never get tired of reviewing your policy to see if there are gaps that could leave you exposed to risks.
- Excess: This is basically what you pay out of your own pocket before a claim kicks in. Say, a $500 excess on car insurance means you cover the first $500 of any repair. Ask yourself if you can afford the excess.
- Conditions: These refer to rules that you must follow, like making sure your home is secured to prevent theft claims. Be sure to meet these requirements because failure to do so might lead to unsuccessful claims.
- Definitions: Clarify what counts. Depending on your policy, terms can mean different things. For example, ‘theft’ might exclude ‘unlocked property’.
Take the time to dig into these sections and save yourself from unexpected denials when you need your insurance most.
The Role of an Insurance Broker
Decoding a PDS doesn’t have to be a solo mission. Insurance brokers are there to help you in making sense of the fine print.
Here’s what we do:
- Translate Complex Jargons: Insurance brokers break down difficult terms, like “indemnity” or “subrogation”, into everyday English, so you know exactly what you’re signing up for.
- Highlight Key Exclusions: Brokers point out limitations that matter to you. Say, if you’re a landlord, brokers will tell you about exclusions for a strata apartment complex.
- Compare PDS Documents: Brokers review policies from different insurers to find the best fit for your needs.
- Ask the Right Questions: Brokers will dig into details you might miss, ensuring your coverage is tailored for you.
Imagine you’re a tradie working with an insurance broker. You’re about to sign a policy for your tools, but an insurance broker notices an exclusion for tools left in an unlocked vehicle; something you often do. They will then search for a policy that better suits your needs, sparing you a potential $3,000 loss if your tools are stolen from your ute.
QUESTIONS? JUST ASK
Marel Pencev
That’s what insurance brokers do: bringing clarity and confidence while ensuring your PDS works for you.
Proactive Steps to Understanding Your Insurance
Do you have to be an expert to understand your PDS?
No.
All you need to do is to be proactive. Here’s how to get started:
- Request and Read Your PDS: Never hesitate to ask for the latest version of the PDS before signing up or renewing your policy.
- Ask Questions: Reach out to your insurer or insurance broker if you don’t fully understand something. Don’t be afraid to ask or clarify matters like the biggest exclusion you should know or whether the policy itself covers your specific needs.
- Review Regularly: Life changes and things happen. You might have bought a new car or started another business. One way or another, this potentially means that your policy no longer fits. So it’s important to check your PDS annually or after big changes.
A little effort now can save you from a lot of stress and sleepless nights later.
Navigate Your Product Disclosure Statement with an Expert
Understanding your PDS is crucial to avoid financial headaches. It’s your roadmap to knowing what’s covered and what’s not, so you’re not caught off guard during a claim.
This is where working with insurance brokers comes in handy.
We are insurance brokers in Sydney, helping to empower you to make informed choices. We decode the tricky parts for you and ensure that your coverage is tailored to your needs.
So, what are you waiting for?
Take control today!
Don’t let confusion put your future at risk. Contact Tank Insurance now, and confidently face the fine print.
General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.
All information above has been provided by the author.
All information above has been provided by the author.
Marel Pencev, Tank Insurance, ABN 22 652 716 964, AFSL 478959
This article originally appeared on Insurance Product Disclosure Statement (PDS) Explained and has been published here with permission.
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