Topic discussed: Legislation changes and the impact it has on you
Thursday, 5th September 2013 – 1:30 pm
In this week’s segment, Adam provided some professional advice on ways to access your superannuation early and how the latest changes in the legislation will impact you. Adam discussed the importance of understanding what you are covered for and what you are paying your income protection premiums for. As with all contracts it is important to always check and understand what is in your benefit statements, see how much and what you are entitled to. Adam also explains why it is vital to clearly understand the terms and conditions of your policy so you know if you are entitled to total and permanent disability (TPD) benefits, income protection and life insurance.
Adam explained that in his experience many Australians are not aware of how many and what their superannuation funds are and why it is important to consider consolidating these.
Chris: From Turner Freeman Lawyers today I have Adam Tayler on the line who specialises in a form of insurance law particularly superannuation.
Chris: Now there have been a few changes to the legislation that means potentially for people who win personal injury claims – for example a life insurance payout could be entitled to additional funds for their superannuation.
Chris: Now explain to us – explain the concept a little more senior counsel Adam Tayler in on the line.
Chris: Can you explain exactly how these changes in legislation effect those with life insurance policies or those who have won a personal injury case.
Adam: So generally, Chris if someone is entitled to compensation because they suffered an injury or illness; as result of a negligence of someone else generally they can also in those circumstances access their superannuation. Sitting behind a superannuation is commonly another insurance policy for total and permanent disablement (TPD) or in some cases income protection so the ability for people who are seriously injured (so not small, temporary or minor injuries) so not just for people who can’t work for 2 years or longer. Total permanent disablement is you are permanently unable to go back to your usual job.
Chris: You can rely on the insurance, or life insurance that is attached to your superannuation life insurance policy.
Adam: That’s correct.
Adam: So that in those circumstances the insurer will pay a sump sum of money into your super. Your super fund than requires to give you access to all of your super including that insurance.
Chris: So this doesn’t mean you have to hit a particular age which is usually the case when you access your superannuation.
Adam: That’s correct. So super is therefore retirement essentially so once people are 55 or older and they chose to retire from the workforce they can access their super. In these circumstances where you’re seriously injured or ill and are unable to work, you can also access your super early.
Chris: I gotta say I don’t think your average superannuation policy holder would be aware of it.
Adam: That’s my experience Chris. Lot of people don’t know about this, a lot of people are paying premiums for this that don’t even know it’s there. So it’s a very good time to check your superannuation and accounts statements to see what coverage you got.
Chris: Or if you rang your superannuation policy provider and asked “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 entitlements.
Adam: So the questions they should ask are:
- Whether they have some total or permanent disability or TPD insurance
- Whether they also have income protection insurance as well
Adam: Income protection is designed for more temporary disablement, so if you are temporarily unable to work than that can kick in and pay part of your wages.
Chris and Adam:: Usually that is sold as a separate product but in 9 out of 10 super funds it comes as a default option.
Chris: So to update your knowledge on your superannuation policy is a good first step.
Adam: Absolutely. People should look at their statements, if they are uncertain about it they should ring their superannuation fund and ask them these questions.
Chris: If you have a question for Adam Tayler, he’ll be here for the next 10 minutes.
Chris: 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 person could have earned in super. Is that right?
Adam: That’s correct. So if someone passes away they would have an account balance in their superannuation. In additional upon their death the insurer will pay a benefit into that account and the beneficiary of that account will be able to get access to all of that money.
Adam: It does differ from trust fund to trust fund so the definition of beneficiary changes but generally it is the spouse and if the person is not survived by a spouse it is the child.
Chris: Not normally can you get access to a lawyer for free but Turner Freeman Lawyers, the sponsors of this segment are on the line to take your calls and answer any questions you might have about superannuation compensation and claims.
Legal matters with Turner Freeman Lawyers.
Traffic update from a caller. A car or a truck accident, multiple, maybe on fire on the highway top of the bridge.
Vern – a caller with a question
Vern: I just wanna know if it is legal from insurance superannuation companies to keep charging $3000 a year for an inactive account of a life insurance that is completely drained.
Adam: Is it legal? Yes it is if you have accepted those conditions when you first applied for your super fund. And this is why it’s important to keep checking your super statement because I have seen higher premiums than that coming out of accounts that people just don’t know about.
Vern: Yeah but what I can’t understand is that when I get my account after a certain time it had to be returned to the government or the taxation department.
Adam: It is but it is a very low barrier so if you have been enjoying the coverage …. don’t even know I had it.
Chris: You know you can’t do much about it right Vern.
Vern: I just think it’s wrong. I know it’s my fault for when I left my job I should have rolled it into the next one but I just forgot all about it. And then until I started chasing up the Australian Taxation Department to find out if I had any inactive account and then they sent me an account with how much I owed them.
Chris: I guess this is a classic point why people need to follow and make sure they know their superannuation accounts and what they contain.
Wendy – listener asking a question
Wendy: I worked for the public service in the ACT, my job is still open however I have been off work since January this year and they are still holding my job open. However I’m just wondering with my super which I haven’t been contributing into since I’ve been not working is my income protection still valid and can I actually claim.
Adam: Yes, yes it is provided you had the coverage when you ceased work it will still respond and it doesn’t matter you haven’t been contributing to it the past 6 months.
Wendy: Oh fantastic.
Chris: So the coverage doesn’t reduce because you’re not paying instalments?
Adam: No, provided you had the coverage current at the time you ceased work than she’ll be able to access that insurance.
Chris: Little bit of good news Wendy.
Aaron – listener
Aaron: My mum got a TPD lump sum payment paid out probably over a year ago now, these new changes that you’ve mentioned I’m just wondering if she can now go back to the superfund and ask if she can get the super as well?
Adam: She should have had access to her super at the time and had the option to leave some of it there if she wanted to but she certainly would have access it to at the time.
Chris: Answering questions left right centre.
Gus – listener
Gus: My late wife had a super, she had a car accident and became disabled, got paid out disability insurance payout. Left $5,000 balance in her super while she was alive. 2 years later she passed away unexpectedly in heart attack. From the $5,000 she got paid out $6,000 don’t know what the extra was. Is she entitled to any further insurance?
Adam: It does depend Gus on the particular super account and super fund. Sometimes when you get a 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 that the insurance was current at the time she passed away the insurance will still pay.
Gus: If the $5,000 in the account remains to keep it active, is the death cover still remain active or not.
Adam: It should of. 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.
Gus: Should I go back to the insurance company or should I get a lawyer?
Adam: Either or Gus but certainly it is worth a call to the super fund enquiring to what the insurance situation was as at the date of her death.
Chris: Adam Tayler, thank you very much for answering these questions and for explaining the changes.
Chris: Adam Tayler for Turner Freeman in our legal matters segment.