What’s a PDS? And How to Read It to Understand What Your Insurance Policy Really Covers

At a glance: 

• A PDS (Product Disclosure Statement) explains what your insurance covers, what it excludes, and how claims work. It’s legally required in Australia.
• Start with the Key Facts section for a quick overview of benefits, limits, and exclusions.
• Focus on important details like what’s covered, what’s excluded, how to claim, waiting periods, and payout limits.
• Use the glossary to understand tricky terms. Highlight key points and compare PDS documents before choosing a policy.

Most people only glance at their insurance documents until something goes wrong. But buried in that long PDF or email attachment is the most important document in your policy: the Product Disclosure Statement or PDS. It’s the legally binding outline of exactly what your policy includes, excludes, and how claims are handled.

In Australia, insurers and underwriting agencies are required by law to provide a PDS before you purchase a policy. Yet many policyholders skip over it, only to be caught off guard when it’s time to make a claim, discovering too late that certain events weren’t covered, or specific conditions were applied.

A 2023 survey by Compare the Market found that nearly one in six Australians (15.1%) do not read their insurance policy documents, leaving them unaware of policy exclusions and other conditions. 

In this blog, we will help you understand what PDS is and how to read it to understand what your insurance policy really covers. 

What Is a PDS and Why Is It So Important?

PDS, which stands for Product Disclosure Statement, is a document that includes all the information for an insurance policy, such as policy overview, inclusions, exclusions, claim process and other important terms and conditions. In short, it is a legally required document that explains exactly what your insurance does and doesn’t cover.

The main purpose of a PDS is to help you decide whether any given policy is right for you. For instance, if you are looking for income protection insurance, its PDS will consist of your policy covers, exclusions, waiting period, benefit period, and more, which will help you make an informed decision. 

In Australia, financial services providers like insurers and underwriting agencies are legally required to provide a PDS before an insurance contract is signed. This ensures transparency and enables consumers to make the right decisions.

If you are wondering where to access a PDS, you’ll typically receive it via email or in your online insurance portal. If not, you can request a copy from your insurer at any time. Make sure to keep it somewhere accessible. It’s the single source of evidence when reviewing your policy or making a claim.

How to Read a PDS: A Simple, Step-by-Step Approach

It is common for people to feel overwhelmed when faced with several pages of fine print. As a result, they usually skip reading the PDS or leave the latter pages. This can be a big mistake, as your insurance policy can have a huge impact on you and your family. 

That said, reading your Product Disclosure Statement (PDS) doesn’t have to be daunting. With a clear approach, you can extract the information that matters most to you and avoid costly misunderstandings later. 

Here is how you can read a PDS in a simple way. 

Start with the Key Facts or Summary Section

Every PDS begins with a Key Facts Sheet or summary table, especially for standard personal insurance products. Most of the time, you can decide if the policy is right for you or not simply by reading this section, as it is designed for quick scanning. 

It includes all the major details, such as the type of coverage, which can be income protection insurance, trauma insurance, life insurance, accidental death insurance and so on. Moreover, it also includes basic inclusions and exclusions, which are among the most essential parts of the policy. It also gives you an idea of the coverage limits or maximum benefit amounts. Most of the PDS also provides information about the cooling-off period in this section. 

Overall, you can get a 360-degree view of whether the policy seems fit for your needs before diving into the details. If something looks unclear or missing, that’s your sign to read deeper.

Focus on the Most Important Areas

Once you have covered the summary and key facts area, move on to the core detail areas, which can directly affect your ability to make a successful claim. This part includes what’s covered, what’s excluded, claim procedures, and definitions. 

For example, if you are looking for total permanent disability insurance, check what kinds of scenarios will pay you. What specific events or scenarios are covered? For example, does “injury” include both accidents and repetitive strain, or only sudden events? This is very important as they decide whether your claim gets approved. 

Likewise, look out for the policy’s exclusions. These are just as important details, if not more so. They outline what’s not covered in your policy. Look for exclusions related to pre-existing conditions, risky activities, or non-disclosure at application. For example, most TPD insurance does not pay if you are engaging in high-risk activities like skiing or parachuting. It is also a good idea to check how the agency defines such terms. 

After the inclusion and exclusion, look for the claim procedures. Find out how and when to lodge a claim. Also, additional attention must be paid to what documentation is required and the timeframes for reporting incidents. Some policies require immediate notification or have strict deadlines, and missing these can void your claim.

Another important part of a PDS is the waiting period and benefit caps or sub-limits. Waiting periods are common in health and income protection insurance, determining how long you must wait before payments begin. Sub-limits are often found in health policies and place a cap on payouts for specific treatments or services. These details are usually buried mid-document, but they can make a big difference to your claim. So, always check out the waiting time and sub-limits and ensure that they suit your needs. 

Use the Glossary to Understand Complex or Technical Terms

Most insurance Product Disclosure Statements include difficult terms and jargon, which can be very confusing. You need to be very careful when dealing with such terms and jargon to avoid trouble when making claims. Luckily, most PDS documents include a glossary of terms at the end or in the side margin. Use this actively as you read. 

The key terms to look up include indemnity, underwriting, pre-existing conditions, waiting periods, benefit periods, total disability definitions, and more. These can directly affect your eligibility and the amount you’ll receive if you ever need to claim.

For example, indemnity refers to a promise of compensation that restores you to your prior financial position, especially relevant in income protection insurance. Underwriting is the process your insurer uses to assess risk based on factors like health and occupation, and price your policy. A pre-existing condition involves any medical condition you had before your policy commenced, which may not be covered unless disclosed upfront.

In addition to those, also look out for terms like claim, deductible, loss, beneficiary, policy, premium, and insurable interest, which may apply to many types of insurance.

Make Notes, Highlight Key Clauses, and Compare With Your Needs

After you are done reading the PDS, highlight key clauses that directly affect you, especially those that define what’s covered and what’s not. For example, if you’re considering income protection insurance and the policy excludes mental health-related claims, that’s something you need to know before committing.

Likewise, you can make margin notes or summaries so you can revisit them later. Since most PDS documents are long and text-heavy, this will save time when reviewing.

Finally, if you’re comparing multiple insurers, don’t rely on the policies’ names alone. Even if the policies sound the same, some exclusions or benefits may vary widely. Always compare side-by-side and never make assumptions to ensure the policy meets your personal needs.

The bottom line is that a Product Disclosure Statement (PDS) is your roadmap to understanding exactly what your insurance policy does and doesn’t cover. Whether you’re insuring your income, health, or life, knowing the details upfront can save you from disappointment, delayed claims, or outright rejections when it matters most.

Reading a PDS might not be exciting, but it’s essential. It gives you the confidence that your policy aligns with your needs and that there are no hidden surprises down the track. Take the time to review it thoroughly, highlight critical clauses, use the glossary to decode complex terms, and don’t hesitate to ask your insurer or broker questions.

Need help reviewing your policy or further understanding the PDS? Contact Aspect Underwriting for expert guidance and tailored insurance advice before you commit and claim. If you’re considering Income Protection, TPD, Trauma and Accidental Insurance, you can get a free quote just by filling out a simple form.