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TPD, Income Protection & other insurance

TPD, Income Protection & other insurance

Employers in Australia are required to make contributions to superannuation funds for their employees.

While the primary purpose of superannuation is as a savings account for retirement, many superannuation funds also contain insurances for the benefit of the employee.  Such insurances often include:

  • Life insurance – lump sum payable on the worker’s death;
  • Total and permanent disablement insurance – a lump sum payable in the event the worker loses a capacity to work;
  • Income protection insurance – periodic payment insurance payable when a worker is unable to work for a period; and
  • Trauma Insurance  – cover in the event of specified illnesses (this generally only exists in older policies).

The benefits payable under these polices can be significant.  Segelov Taylor are able provide advice and representation to ensure that all benefits are recovered.

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Total & Permanent Disability (TPD) Insurance

Total & Permanent disability insurance (commonly known as TPD insurance) is an insurance policy that provides a lump sum benefit to policy holders if they develop an injury or illness that permanently prevents or limits their ability to work. TPD policies are commonly provided as part of superannuation funds, as the law permits the policies to be paid from the superannuation (meaning that it is not taxed), and because the superannuation funds obtain significantly better terms by buying policies that cover large numbers of members. TPD benefits may also be available under a private life insurance policy. Unlike a workers compensation claim, or a negligence claim for damages, a TPD policy does not require that the injury or illness is related to work or as a result of someone else’s action.  While the precise terms of the policies vary between insurer most policies will respond if:
  1. you have been continually absent from work because of injury or illness for a specified time (usually 3 months or more) and
  2. you are unlikely to ever work in any occupation or work for which you are reasonably qualified by education, training and experience.
Some policies contain an (“own occupation”) provision which means that the test is whether  you are to be unlikely to work again in your usual occupation. Further, some policies require you to satisfy a minimum level of employment before you are eligible to seek a total and permanent disability payout. This is generally in the form of total length of employment or number of weekly work-hours. If you are a member of several different superannuation funds, you may be able to claim TPD entitlements through each fund.

Income Protection Insurance

Income protection insurance policies (salary continuance policies) pay a benefit to policy holders in the event you are not able to do your normal job for a period and therefore lose income. Your disability or illness does not need to be caused by work. Many superannuation policies contain income protection insurance in the form of total and temporary disability (TPD) policy. The amount of time you will receive payments will depend on the policy. Some polices only cover a defined period say between 2-5 years. Other policies will pay benefits until you are 65 years or older. Most policies will pay a percentage, usually 75% of usual wages or salary excluding overtime, bonuses, penalty rates and other allowances. You may also be able to claim from your income protection policy if you have had to change jobs or working hours as a result of your illness and have lost money as a result. There will be a waiting period before you can apply to make a payment. The waiting periods will differ depending on the policy and can be anywhere between 14 to 90 days or longer.

Trauma Insurance

Many superannuation funds and insurance companies offer the option of taking out an insurance policy for specific medical conditions such as cancer or heart attacks. Under the terms of the policy you are entitled to claim a one-off set lump sum benefit if you suffer from or are diagnosed with a specified condition. Trauma policies cover the major illnesses or injuries that will make a significant impact on your life such as cancer, heart attack, stroke or an accident. Most polices have a waiting period and will also exclude persons with pre-existing medical conditions.

Terminal Illness and Death Benefits

All superannuation policies contain an insurance policy that provides payment of a death benefits in addition to payment of the balance of your superannuation account. Superannuation funds allow a person to nominate a beneficiary to receive payment of your superannuation contributions and death benefit. If the nomination is a binding nomination then it must be followed by the superannuation fund. A binding nomination can however be challenged in certain circumstances, such as where the recipient is no longer a dependant. A binding nomination must be renewed every 2 to 3 years and must be valid at the date of death. If there is no binding nomination them the trustee of the superannuation fund will decide how the payment is distributed and will seek details of your dependants including surviving spouse and children.

Early Access to Super

Generally, you cannot access your superannuation before you reach your preservation age  (now at least 56 years and up to 60 years for those born on or after 1 July 1960) and you have retired. However there are limited circumstances where the law allows you to access your superannuation early including:
  • Severe financial hardship
  • Compassionate grounds
  • Permanent departure from Australia
  • Terminal illness
  • Permanent incapacity
  • Balance of $200 or less
What is severe financial hardship?
To qualify for severe financial hardship you must have been receiving a a Centrelink or Department of Veterans’ Affairs (DVA) pension (depending on which body makes your income support payments) for more than 26 weeks and be unable to meet reasonable and immediate family living expenses such as mortgage payments, rent, school fees, child support payments. If you satisfy the conditions the trustee of your superannuation fund may give you access to a portion of your benefit (no more than $10,000 in any 12 month period) subject to certain conditions.
What are compassionate grounds?
Compassionate grounds include
  • suffering a life-threatening illness;
  • trying to prevent the bank selling your home;
  • medical treatment expenses;
  • funeral expenses;
  • palliative care;
  • modifications to home and/or vehicle where you or your dependant suffers a severe disability.
The way you apply for early access to your super will depend on the category of claim you are making. Applications are made to either your super fund or where the application is on compassionate grounds to the Department or Human Services. For cases of severe financial hardship you must provide evidence of debts and expenses to support your application.

Common Questions

Segelov Taylor Lawyers acts on a ‘no win no fee’ basis in approved insurance claims such as TPD, income protection or TTD, trauma and death benefit claims in respect of our professional fees. This means we will not be paid unless you are successful in obtaining monies under your policy.  Our usual practice is that you will be required to pay external disbursements (such as medical reports and filing fees) as they occur. Find out more…
If your claim is rejected you have a number of options. Insurance policies generally allow for an internal review process. This should normally be pursued before litigation is commenced. If an internal review rejects your claim then you can make a complaint to the Superannuation Complaints Tribunal or you can bring proceedings against the superannuation fund or insurer in the District Court or Supreme Court. You can also bring proceedings in the District Court of Supreme Court if the superannuation fund or insurer is taking too long to make a decision in relation to your claim.
Yes. Any information you provide your lawyer is covered by legal professional privilege.
Total and permanent disability (TPD) claims
TPD insurance benefits pay a lump sum in the event you suffer an injury or illness and you are unlikely to work in your normal job or an occupation for which you are reasonably qualified by education, training and experience.
Income protection insurance and total and temporary disability (TTD) claims
Income protection and TTD insurance pay an ongoing benefit (often paid monthly) to replace income in the event you are not able to do your normal job for a period because of an injury or illness.
Trauma Insurance claims
Trauma insurance pays you a lump sum benefit in the event you suffer or are diagnosed with a particular health condition (such as a cancer or heart attack).
Life insurance, terminal illness and death benefit claims
Life insurance or terminal illness/death benefit pay your dependant(s) a lump sum if you die before a certain age.  Many policies also permit some of the benefit to be paid following a diagnosis with a terminal illness.
Unless you have obtained it directly from an insurer, most people who have TPD, TTD, income protection, trauma or other types of “life insurance” policies do so as part of their superannuation. Large superannuation funds (particularly industry funds) offer members access to insurance on far better terms than individuals could access. However, this means that most policy holders have limited knowledge about the terms of their cover. Information can often be obtained from the fund website. Your employer may also provide insurance for all employees or insurance cover may be a condition of an enterprise bargaining agreement or your contract of employment. Part of our role in assisting people with insurance claims is to identify what policies they have, and the terms of their policies.

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