Insurance options inside superannuation
The vast majority of Australian workers have a superannuation account. The primary purpose is to save for life after retirement. But most super funds also provide insurance options for the worker. These include total and permanent disablement cover (TPD), income protection (also called salary continuance) and death benefits.
While the rules around insurance cover through super have undergone significant change over recent years, it is still the most economical way to cover yourself in the event of injury and illness for most Australians.
What is TPD insurance?
TPD stands for Total and Permanent Disablement. The most common type of TPD insurance generally covers you when you have an injury or illness which has prevented you from working and which (based on medical evidence) will continue to prevent you from returning to any form of work for which you are suited taking into account your education, training and experience. This is known as “any occupation” cover.
Another type of TPD insurance is what is called “own occupation” cover. This type of cover only requires you to be unable to continue working in your usual occupation rather than taking into account all types of employment you might be qualified or suited for. However, these policies are becoming rare within the superannuation context.
What is income protection?
This type of insurance replaces your regular income if you are prevented from working on a temporary basis due to an illness or injury.
Depending on your level of cover, you might have a benefit paid to you for 12 months, two years, five years or less commonly, up to age 65 (or even 70 in some cases).
You have to be unable to work for the required length of time initially (generally referred to as the “waiting period”) before a claim will be accepted and paid. You will also generally be paid monthly in arrears. Cover is usually based on a percentage (usually 75%) of your standard average income prior to getting sick or injured.
What are death benefits in super?
This is life insurance which pays a lump sum to your nominated beneficiaries (or to your estate to be dealt with under your Will). Some policies include exclusions if you die as a result of suicide, a pandemic illness or during active duty.
Insurance inside super versus insurance outside super
There are some pitfalls of insurance inside super. This type of insurance is by no means a “one size fits all” type of cover. It is a good safeguard or safety net for those who do not want to investigate other insurance options. This includes options for insurance outside super, which may be more suited to their personal circumstances but which will typically cost more in terms of premiums payable.
Nobody likes to wade through an insurance policy (definitely great as night-time reading if you are having trouble getting to sleep). However, we always recommend that you obtain a copy of your insurance policies from your super fund (or the relevant product disclosure statements as a minimum) and review them to ensure you understand precisely what, and how much, you are covered for.
By way of example, until 2020, nobody really took any notice of any pandemic exclusion clause in an insurance policy. They are very common in life insurance (death benefit) policies where generally speaking; any death benefit will not be payable if the insured dies from a pandemic-related illness.
Insurance benefits generally reduce the older you get. This benefit amount usually changes each year. Some even cease well before a member is even considering retiring so it’s best to understand those basics to ensure you have the right cover if you are planning to work to a certain age (for example 65 years old).
Get help with a TPD, income protection or death benefit claim
At Hall Payne Lawyers we assist with complicated insurance claims. We can help you understand whether or not your claim is likely to be accepted based on a review of your policy of insurance.
Having someone on your side who understands the claims process as well as the insurer’s obligations and the legal terminology, is often the difference between having your claim accepted or rejected by the insurer.
If your claim has been denied, is taking too long or you have any other concerns in relation to TPD, income protection or death benefits, get in touch with a member of our Superannuation and Insurance team.
Contacting Hall Payne Lawyers
You can contact us by phone or email to arrange your consultation; either face-to-face at one of our offices, by telephone or by videoconference consultation.
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This article relates to Australian law; either at a State or Federal level.
The information contained on this site is for general guidance only. No person should act or refrain from acting on the basis of such information. Appropriate professional advice should be sought based upon your particular circumstances. For further information, please do not hesitate to contact Hall Payne Lawyers.