Everything you need to know about product disclosure statements

Not to be confused with a PDF, a PDS (product disclosure statement) contains all the vital information you will need to make a decision about a finance product.

In fact, it is a must that financial service providers, including banks, credit unions, and insurance companies provide you with a PDS when recommending or offering a financial product. This could be anything from a life insurance policy to a credit card.

The PDS should lay out for you:

• Significant benefits and risks associated with the product
• The cost of the financial product
• Fees and charges the financial provider might gain from your use of the product
• Specific terms and conditions for the product's use
• How to get in touch with the provider in case of emergency

A PDS’s main purpose is to provide you with all the information you need to make a decision about a policy or a bank card. After reading the PDS or broader set of documents, you should be aware of all the benefits, risks, and conditions associated with it.

This way you’ll know exactly what you’re getting yourself into and you won’t be stung with a monthly fee you didn’t budget for or an underinsured by a policy that doesn’t suit your needs.

Tackling a PDS document can seem a daunting task, but luckily nine times out of ten it comes with a handy index at the front. You can almost think of it as a mini book broken down into sections.

The table of contents will walk you through what is included in the PDS, so if there is something specific you’re after, such as flood cover with your home insurance, you can hone in on it straight away.

Generally speaking, the provider will kick things off with an about section and often a mini-guide on how to read your PDS. Plus, if you’re struggling to understand some of the insurance/finance jargon, you’ll be relieved to hear that most product disclosure statements come with a glossary or definition of terms either at the beginning or end of the document.

Of course what exactly is included in a PDS will vary depending on what the product is and who is offering it. But just so you have a general idea of what to expect, we’ve come up with a few things that you will usually find in product disclosure statements for home insurance, car insurance, and life insurance.

Home insurance

A typical home insurance product disclosure statement will tell you who is covered, the maximum sum the insurance company will cover you for, what is covered, and what is excluded from the policy.

It will also tell you for what events you will and won’t be covered for. This is important to note especially when it comes to natural disasters, as policies can vary widely on whether or not they include things like flood, fire, and storm cover.

Definitions will also matter greatly here, as flooding from a river might be covered but runoff from heavy rainfall might not. Depending on your needs, a specific policy may not suit the risks associated with your home, so reading the PDS carefully could save you some nasty grief down the road.

Car insurance

As with any insurance policy, a car insurance PDS document will detail out what you are and are not covered for. Things to look out for include:

• The ‘about your car’ section. This will tell you exactly what counts as your car and what does not count. For instance, accessories and modifications might count but fuel and lost keys might not.
• Your responsibilities. As well as disclosing what they will cover you for, insurance providers will usually list out what your responsibilities are to them. This is stuff like telling your provider when you move house, being honest about who is driving your car regularly, and keeping your car in a roadworthy condition.
• Types of policy you can choose from. When it comes to car insurance there are three standard levels of cover to choose from: compulsory third party, third party property car insurance, and comprehensive car insurance. Although insurance companies will sometimes have PDS documents solely dedicated to comprehensive policies, they will also often breakdown all three levels of cover in the same product disclosure statement.

Life insurance

If you’ve ever had a life insurance policy, then you’ll know that ‘life insurance’ is pretty much an umbrella term that refers to death cover, total and permanent disability insurance, trauma insurance, and income protection insurance, to name a few.

The definition for each type of cover will be laid out in the life insurance PDS and it’s particularly important that you read each one, as what exactly the terms refer to or cover can vary between providers.

On that note, you will also often find a ‘medical definitions’ section in the life insurance PDS. This is vital information, as it explains what health conditions or ‘events’ the insurance company does and does not cover.

As well as listing out the terms and conditions of the policy, the PDS should also include guides on how to make a claim and how to make a complaint.

Making a claim can be an arduous process, so it’s good to know ahead of time what evidence you might need to support your claim, who to contact to make a claim, and how long you might have to put in a claim.

If you can’t find information on how to make a complaint in the PDS, then you will most definitely find it in the financial services guide (FSG).

While the PDS focuses on telling you everything you need to know about the product, the FSG is designed to tell you more about the financial service provider themselves.

The FSG will include stuff like:

• Who the financial service provider is
• What financial services the provider offers
• What financial products the provider offers in relation to the financial services offered
• Where to go to make a complaint
• The financial provider’s AFSL number (Australian Financial Services Licence number)

The last one is important, as you can cross check this with information available on ASIC’s website (Australian Securities and Investments Commission).

While it may not be the most riveting read, it is always a good idea to read the PDS cover to cover before signing up to the financial product.

Think of it like a homework assignment that you have to get through. You might even want to crack out the highlighters or coloured pens to make notes on anything you’re not sure about or that you want to follow up with a call to the insurance company. Maybe even print it out and read it over a cup of tea or coffee. 

Remember that if you don’t have a financial advisor then you are pretty much your own financial advisor, meaning you will have to make sure you’re on top of everything you do with your money. 

Want to read more of our insurance guides? You can find lots of useful information on home, car, and life insurance at our insurance hub page.

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