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Many people are not even aware of it, but part of the amount you pay regularly into your superannuation is likely to be a premium for an insurance policy that will cover you in the unfortunate event that you suffer 'total and permanent disablement' or TPD. This is in addition to your ordinary superannuation payments, which are generally held by the fund to provide you with an income when you retire.
If you have to stop work due to illness or injury prior to retirement age, you may be entitled to financial help through your TPD cover. If you have a number of superannuation funds under which you have TPD insurance, you may be entitled to seek help from all of them.
What is 'total and permanent disablement'?
This is a great question, because the answer is not necessarily what you'd think. Exactly what constitutes 'total and permanent disablement (or disability)' for your insurance cover will depend on the terms of your policy.
Generally, the terms of the insurance will say that a person is considered to be totally and permanently unable to work in one of two circumstances:
1. the person is unable to continue to work in the type of job they were performing at the time they were injured, or the illness began - let's call this 'job-specific' cover; or
2. they are unable to perform any suitable job, considering their education, skills and experience.
Because the entitlement to claim under job-specific cover is easier to establish, payouts are more likely, and consequently the premiums for this type of insurance tend to be higher. TPD cover through superannuation is likely to be the second type - paid only if you are unable to perform any job you are qualified for by your education, skills and experience.
Why have TPD cover?
Just like any insurance, the idea of TPD cover is that you pay a small amount regularly, in this case throughout your working life. In return you can make a claim for the payout specified in the policy if you ever meet the criteria.
For TPD insurance, you will only meet the criteria if you've been unfortunate enough to suffer an injury or develop an illness that stops you from working. Obviously, it's best if you never have to make a claim, but it's good to have the option available if you need it.
Claims under your TPD policy can be made in addition to any worker's compensation payments, and any damages claim you make through the courts. You may be able to claim TPD in addition to receiving regular payments under any income protection insurance you have. This will depend on the terms of both policies.
Eligibility to claim for TPD depends on the level of incapacity, rather than the cause of the inability to work. It can be available whether you have suffered an injury or developed an illness that prevents you from working, or both. Where you have been diagnosed with a terminal illness, you may be able to receive financial support under different insurance, or direct from your superannuation funds.
In order to claim, your super fund will usually require you to complete a claim form and supply certain pieces of evidence. This will generally include medical evidence, such as medical reports and test results.
The claim form may be lengthy and require detailed information, including statements from your employer and doctor. Once your form and initial supporting evidence are submitted, your claim will be assessed.
The insurer may require you to submit further evidence and meet additional requirements, like an independent medical examination. The time it takes to assess a claim varies between providers, but could be around 6 months, or even longer.
The speed and success of a claim often depends on the quality of information and evidence provided. A lawyer experienced in superannuation TPD claims can review your material, give you advice, and assist you to submit the best evidence as quickly as possible, to avoid delay in the progress of your claim.
An approved claim for TPD is usually paid out as a lump sum. If the insurance is provided by your super fund, the lump sum will probably be paid into your superannuation account.
It can then be withdrawn, either as a lump sum or as periodic income payments. You should consider getting financial advice before withdrawing any TPD payout funds, as there are significant tax implications of different withdrawal types.
If your claim is refused, you will most likely have the right to seek a review of that decision. This starts with asking the insurer or super fund to reconsider their decision. At this stage, legal assistance may be useful to aid in negotiations with the insurer - a lawyer may put forward additional documents and information that can resolve any impediments to the claim being approved.
If the dispute with your super provider can't be resolved, a complaint can be made to the Australian Financial Complaints Authority (AFCA). Ultimately, you may wish to take court action against the insurer. A lawyer can help prepare the complaint to the AFCA; and can ultimately assist with court action if required.
At any time, if you have any questions about your claim or rights, a chat with a lawyer who 'knows the ropes' for TPD superannuation claims, for example, someone from Smiths Lawyers, can give you the answers and reassurance you need.
Quick list - relevant documents and information
1. Insurance policies - get copies from your superannuation provider if you can't locate them in your records
2. Forms required under your policies - check these early, so you can:
a. Gather the documents you require
b. Line up the people who need to contribute for example, doctor, employer
c. Seek advice if you need help to complete the forms
3. Government guidance on TPD and other insurance
4. The Financial Services Council
5. The Australian Financial Complaints Authority (AFCA)