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When am I owed interest on my TPD or income protection benefit?

 


Interest payments on slow income protection or TPD claims

Insurers sometimes take much longer than they should to pay out benefits for Total and Permanent Disability or income protection insurance.

If an insurer has taken an unreasonable amount of time to pay, you may be entitled to claim interest on your benefit.

Interest is payable from the date it becomes unreasonable for an insurer to have withheld payment.

The question then becomes: what does “unreasonable” mean?

The answer is, unhelpfully: “it depends”.

How long is too long, to wait for your TPD or income protection payments?

It depends on the medical evidence in your case.

A reasonable time to assess a TPD claim can be as little as 3 months if the medical evidence strongly supports your case when you lodge your claim forms and medical documents.

The interest owed on TPD claims can accumulate to significant sums of money.

Consider the fictional example of David:

  • David is builder who suffered a serious back injury in 2015.
  • His doctors certified that he could never work as a builder again, nor could he work in any other field within his education, training or experience as his TPD policy required.
  • David’s TPD insured benefit was $500,000.00.
  • David submitted medical reports that clearly showed he was totally and permanently disabled within the meaning of his policy on 1 December 2015 but he wasn’t paid his TPD benefit until 15 January 2019 because the insurer forced him to go and see multiple specialists to reassess the extent of his injury.
  • David is entitled to claim interest in the amount from 3 months after the insurer had enough medical information to determine he was TPD within the meaning of the policy – 1 March 2016.
  • The amount of interest David is owed by the insurer on top of his TPD benefit is $80,192.74.

What penalty is applied to insurers for delays in TPD payments?

The penalty interest rate imposed on insurers for withholding payment is 3% plus the 10-year treasury bond yield at the end of the relevant half-financial year.

This is hard for anyone to get their head around. Luckily, the Australian Financial Complaints Authority has made a handy guide that has all the applicable interest rates for the last 12 years which you can access here.

Get help?

If you’ve been paid a benefit on your insurance and you think the insurer has unreasonably delayed making payment, get in touch with today’s blog writer, Tom Cobban, for some free legal advice.  

You may also find our article, “Is your insurance claim for TPD taking too long?” interesting and/or helpful.


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