Q & A on 2GB discussing Disability Insurance Claims 05/09/13

Thursday, 5 September 2013

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CS       From Turner Freeman today, I’ve got Adam Tayler on the line who specialises in a form of insurance law, particularly superannuation.  Now, there have been a few changes to legislation that mean, potentially people who win personal injury cases or receive, say, a life insurance payout, could be entitled to additional funds for their superannuation. Now to explain the concept a little more, Senior Counsel, Adam Tayler, is on the line right now.

Adam, good afternoon.

AT       Good afternoon Chris. How are you?

CS       I’m very very well, thank you for your time. Now, can you explain exactly how these changes in legislation affect those with life insurance policies or those who have won a personal injury case?

AT       So generally Chris, if someone is entitled to compensation because they’ve suffered an injury or an illness as a result of the negligence of someone else, generally they can also, in those circumstances, access their superannuation. Sitting behind superannuation is commonly another insurance policy for total and permanent disablement or, in some cases, income protection so the ability for people who are seriously injured and these are not just temporary or minor injuries.

CS       So you can’t work, for instance, for two years or a year?

AT       Or longer.

CS       Longer, right.

AT       With total and permanent disablement, we’re talking about a permanent condition so permanently unable to go back to your usual job.

CS       You can then rely on the insurance or the life insurance that is attached to your superannuation policy.

AT       That’s correct so in those circumstances an insurer will pay a lump sum amount of money into your super and your super fund is required to then give you access to all of your super including that insurance amount.

CS       So, and this doesn’t mean that you have to hit a particular age which is usually the case when you access your superannuation.

AT       That’s correct. So super is there for retirement essentially. So, once people are 55 or older and they’ve chosen to retire from the workforce, they can access their super.  In these circumstances where you’re seriously injured or ill and unable to work, you can also access your super early.

CS       I’ve got to say, I don’t think your average superannuation policy holder would be aware of that.

AT       That’s my experience Chris. A lot of people don’t know about this. A lot of people are paying premiums for this insurance but don’t even know it’s there so it’s a very good time to check your superannuation account statements and see what coverage you’ve got.

CS       Well if you rang your superannuation policy provider and if you called them up and said, can you just tell me, here are my numbers, can you just tell me the nature of my superannuation policy and even if you have to do that through your workplace, what questions should you ask about your superannuation policy? To ascertain exactly what you have in terms of those avenues?

AT       So the questions they should ask are, whether they have total and permanent disablement or TPD insurance or whether they have income protection insurance as well. Income protection is more designed for temporary conditions where you’re temporarily unable to work then that can kick in and pay part of your wages.

CS       Ok, so you should ask about that but usually that is sold as a separate product isn’t it?

AT       It is but in most super funds and I’m talking probably 9 out of 10 Chris, it comes as a default option so there will be some level of coverage, albeit the default coverage is often quite low but there will be some level of coverage there for 9 out of 10 people.

CS       Ok so just to update your knowledge of what your superannuation policy is all about is a good first start.

AT       Absolutely, I mean people should look at their statements and if they’re uncertain about it, ring their super fund and ask the question.

CS       Ok, if you’ve got a question for Adam Tayler, he’ll be here for the next 10 minutes. 131873 is the telephone number.

Now, so hypothetically, if someone receives a payment from their life insurance policy, say after losing their spouse, they could be entitled to the money that that person would have earned in super. Is that right?

AT       That’s correct, so if someone passes away, they will have an account balance in their superannuation. In addition upon their death, the insurer will pay a benefit into that account and the dependent or the beneficiary of that account will be able to get access to all of that money.

CS       Right, ok.

AT       It does differ from trust fund to trust fund, Chris so the definitions of dependent and the definitions of beneficiary change but, generally, it’s a spouse.  If the person is not survived by a spouse then a child.

CS       Ok, alright, stay on the line. We’ve got some callers coming through right now.  131873 Adam Tayler, not normally do you get access to a lawyer without paying a fee, but you do on this programme from Turner Freeman, our sponsors of the legal matters segment and you can call right now on 131873 on these issues.

Yes, legal matters courtesy of Turner Freeman Lawyers, our sponsors.

CS       Vern, you’ve got a question for Adam, go right ahead.

C1       Yeah, thanks Chris. I just wanted to know, is it legal for superannuation companies…if an account’s been inactive for 10 years to keep charging $3,000 a year for life insurance until the account is completely drained?

AT       Is it legal? Yes it is if you’ve accepted those conditions when you first applied for the super fund.

C1       Well I didn’t apply for it, my employee did.

AT       Of course and this is why it’s important to keep on checking your super statements because I’ve seen higher premiums than that coming out of accounts and people just don’t know about it.

C1       Yeah but what I can’t understand, I thought once it got below a certain barrier that it had to be returned to the Government. It was an inactive account and it had to go to the Government or the Taxation department.

AT       It is but it’s a fairly low barrier so if you…you’ve been enjoying the coverage for that period of time albeit at a very expensive premium.

C1       I didn’t even know I had it.

CS       Enjoying is an interesting terminology but you know you can’t do much about it right Vern?

C1       It looks that way doesn’t it.  I just think it’s wrong. I know it’s my fault for when I left a job, I should have rolled it into my next one but I just forgot all about it and then until I start chasing up the Australian Taxation Department to find out my inactive account and they sent me that and then later on they sent me a bill saying…instead of sending me out what was in the account, they sent me a bill I owed them three hundred odd dollars for insurance.

CS       There you go. That is a classic case in point about people being encouraged to follow the progress of their superannuation account and what it contains.

CS       Wendy, you’ve got a question for Adam. Go right ahead.

C2       Yes I do, thank you. I work for a public service in the ACT and my job is still open, however, I’ve been off ill since January and they’re still holding my job open, however, I was just wondering with my super which I haven’t been contributing to since I’ve been not working, is my income protection still valid where I can actually claim?

CS       Good question.

AT       Yes, yes it is, provided you had the coverage when you ceased work, it will still respond. It doesn’t matter that you’ve not been contributing for the last six months.

C2       Oh fantastic, thank you.

CS       So the coverage doesn’t reduce because you’re not paying installments?

AT       No, provided you’re…in Wendy’s situation, provided she had the coverage current at the time she ceased work or stopped going to work then she’ll be able to access that insurance coverage.

CS       Yeah, a little bit of good news Wendy.

C2       That is a bit of good news. I’ve just come out of hospital from my second operation so thank you so much.

CS       Oh good stuff. Right, thank you Wendy. Aaron, Adam is listening, go ahead.

C3       Hi Adam, my mum got a TPD lump sum paid out, probably over a year ago now and these new changes that you’ve mentioned, I’m just wondering if she can now go back to the super fund and ask to get the super as well?

AT       She should have access to her super Aaron at the same time that she was paid the TPD benefit.

C3       So, when the lump, that would have included the amount of super that was in her account at that time?

AT       That’s correct. She would have had the choice to leave some of it in there if she wanted to but she certainly would have access to it at the time.

C3       Yeah, ok, alright well that’s fantastic.

CS       Good on you Aaron. Thank you. Answering questions left, right and centre here. Gus.

C4       Hi Chris.

CS       Hi. Adam’s listening.

C4       Adam.  I have a question, I don’t want to complicate it. My late wife had a super. She had a car accident, became disabled, she got paid out, disability insurance payout. Left $5,000 balance in her super to keep it alive while she was alive. Two years later, she passed away unexpectedly from a heart attack. The $5,000 stayed in there, they paid them out $6,000, I don’t know what the extra was. It might have been it grew interest or something. Is she entitled to any further insurance? Disability, not disability, death insurance at that stage after she got disability insurance the first time and her insurance was still alive?

AT       It does depend Gus on the particular super fund that she…her particular account. Sometimes when you get paid a TPD benefit that will reduce the amount of your life coverage but there may still be a gap there that would be payable by the insurer. Again, provided the insurance was current at the time that she passed away then it should still pay.

C4       Over $5,000 in her account which keeps it alive. Mine is similar and $5,000 keeps it going, therefore, the death cover should have remained active or not?

AT       It should have. Again, Gus, it depends on the particular terms and conditions of the policy and this particular fund but there should be some active insurance coverage there.

C4       $6,000 which is above what I thought was there but I never questioned the insurance side of it. Now since you mentioned it earlier about on the death of a spouse and what happens, should I go back to them and find out or get my lawyer to redo the probate?

AT       Either or Gus but certainly it’s worth a call to the super fund enquiring as to what the insurance situation was as at the date of her death.

CS       Yeah good point. Adam, I’ve got to leave it there. Adam Tayler, thank you very much for answering those questions and explaining the changes.

AT       Thanks Chris.

CS       Ok, Adam Tayler from Turner Freeman in our legal matters segment.