Accessing income protection following injury or illness through superannuation

Slater+Gordon Partners

By Annemarie Gambera,
Slater+Gordon

What is income protection?

The idea of being so injured or ill that you are unable to work for an extended period of time, or permanently, is a frightening concept. Income protection insurance is designed to ensure you can still have some or all of your previous income while incapacitated, but it’s a kind of insurance you want to research and understand before paying the premiums.

Key features of income protection in superannuation

Many superannuation funds offer income protection insurance through the life insurance policies they take out for their members.  While the terms and conditions of policies can differ, some common features are listed below:

  • It is often “opt-in” insurance, meaning it is not automatically provided through membership of the superannuation fund.A superannuation fund member has to elect to include the income protection cover if they so choose;
  • Automatic acceptance: that is, you do not have to undergo medical tests to qualify for the insurance cover;
  • It is generally cheaper than income protection policies outside super;
  • Typically offers 75% of your pre-injury income plus 10% paid into your super;
  • There is usually a waiting period of 30-90 days before the benefits are payable;
  • The benefits are paid monthly in arrears;
  • The benefit period is usually two years;
  • The cover usually ends at age 60 or 65;
  • Offsets and adjustments, if you receive other income payments, reduce the income protection benefit payable;
  • Progress certificates from a treating doctor must be submitted monthly;
  • The premiums for cover are waived whilst you are on a claim;
  • You will have to provide proof of your pre-disability income at the claims stage;

When are payments made?

This is where people making claims can be surprised, and ot in a good way, if they haven’t read the fine print. Typically, you must be ‘totally disabled’ at the end of the waiting period to be eligible to receive benefits. Payments are not made to account for the waiting period.

For example,

  • On 09 March 2018, Bill is injured and cannot work;
  • If the policy provides for a 90-day waiting period, he will not receive any payments at all until 08 July 2018;
  • He will receive payments for the month of 08 June to 08 July and monthly thereafter assuming he continues to be medically certified as unfit for work.

The importance of seeking expert advice

Policies of insurance are often difficult to understand. At Slater+Gordon, we know from our clients that complications sometimes arise in the claims lodgement process and delays in the assessment of the claim can cause additional stress in an already tough situation. Seeking legal advice can assist a person to ensure they have met the criteria in the policy definition and lodged their claim correctly to minimise delay.

 

Annemarie Gambera, Principal Lawyer Superannuation, Melbourne

Annemarie has been practicing law since 1989 and is highly regarded in the areas of insurance and dispute resolution. She is often called upon to provide commentary on various issues and her expertise has led to speaking engagements at international conference in the life insurance sector. Annemarie specialises in all insurance claims including total and permanent disablement, income protection, trauma and terminal illness claims. Annemarie has handled matters in all Victorian Courts, the Victorian Civil and Administrative Tribunal, the Federal Court of Australia, the Financial Ombudsman Service, the Superannuation Complaints Tribunal, the Appeal Costs Board and various interstate courts.