SuperTalk Blog

Income protection with COVID-19

 


Claiming income protection insurance due to coronavirus

Updated 28 May 2020

Many Australians have been stood down, made redundant or had their hours cut because of COVID-19. Some will be eligible for JobSeeker payments (and supplements) from Centrelink or JobKeeper payments via their employer. Others will get the 2 early access to super lump sums.

But what other payments can you get?

You might get annual leave or sick leave payments from your employer (unless you are casual) and it’s possible to get Workcover (but only if you got the virus and can prove you got it at work.

But the big one is income protection insurance.

What is income protection?

Income protection is insurance which covers you if you can’t work for a period of time because of an injury or illness.

It pays a monthly benefit (maybe up to 85% of your wage) for an extended period of time (up to 2 years or longer) after a waiting period (30,60 or 90 days).

Do I have income protection insurance?

About 60% of workers are covered for income protection insurance through their employment superannuation.

Some super funds such as Australian Super, REST, First State Super, VicSuper, HESTA, Prime Super and PSSAP usually include income protection automatically when you join the fund.

Some Super funds don’t offer income protection at all (eg CBUS) whilst others offer it as an optional extra with some underwriting (eg Hostplus, CareSuper and TWUSUPER).

Retail funds such as Mercer Super, BT Super, MLC Super, Asgard Super and AMP Super might include income protection insurance but with some restrictions.

When can I claim it?

You usually must:

  • be off work for the waiting period (30, 60 or 90 days);
  • have an injury or illness (or both); and
  • be unfit to do your usual job or at least some of the tasks.

Importantly, the reason for your illness or injury does not have to be related to your work. For example, you may have had a sporting accident or you may have a chronic illness like multiple sclerosis or motor neurone disease or you may have a mental illness.

How much do I get?

Usually, a percentage of your salary when you stop work (maybe up to 75-85%) up to a monthly cap. The insurer may also pay super contributions to your super fund.

If you are getting Centrelink or WorkCover, those payments could reduce your income protection payments (either $-for-$ or as a top-up). If the offset is a top-up this is usually better and means an income protection claim can still be worthwhile.

If you return to work part-time, you could still get partial disability income protection payments, after deduction of your part-time income.

Can I get income protection because of the risk of getting coronavirus?

No, unless you have an underlying condition that prevents you from working.

So, if your doctor says you shouldn’t work because you are a greater risk of getting COVID-19, check if he/she thinks you can’t do your job because of your health problem.

If I get coronavirus, can I claim?

Yes.

If you have income protection insurance, get COVID-19 and can’t work because of it, you can claim.

There are no general exclusions for COVID-19 in income protection insurance.

However, some insurers won’t give you new insurance cover if you already have COVID-19.

What if I’m made redundant or laid off?

You can still be eligible for income protection if you have an existing health problem and had reached the point of having to stop work anyway.

The termination of your employment or payment of another benefit (eg a TPD lump sum) can stop payments after that date in a handful of policies. It’s important to check before this happens if you can.

If you are planning to resign due to your injury or illness, it’s important you seek urgent legal advice first.

What about other benefits?

You might also have income protection cover from a second super fund, your employer, an industry group (eg Incolink) or a union or community group (eg sporting association or loss of licence insurance).

Some might be offset but not always. We can check this for you, for free.

Unemployment insurance

If you have a credit card or loan, you might have Consumer Credit Insurance which covers the repayments or debt for invalidity but also for involuntary unemployment.

If you are laid off for COVID-19, you might be eligible to claim.

What happens to Centrelink if I’m on income protection?

Income protection payments count towards the Centrelink income test.

This usually means the first $174 per fortnight is exempt but every $ after that reduces your Centrelink payments by 50 cents.

The Centrelink offset applies before any offset in the income protection policy, but you might then be able to claim the shortfall from the insurer.

If your Centrelink is reduced to nil, this could mean you lose your concession card and have to reapply for Centrelink later.

Early Access to Super

Under the Government’s COVID-19 response, super fund members can access up to $10,000 from their super funds twice; once up to 30/6/20 and once between 1/7/20 and 24/9/20.

The application is made to the ATO via the person’s myGov account or by phone. The ATO will then assess eligibility and notify the relevant super fund(s) of the decision. They must then pay the money if the decision is favourable.

A superannuation lump sum payment does not count towards the Centrelink income test. Nor would it affect an income protection claim.

However, if a member’s account is reduced to nil, it would switch off any insurance cover for future events (although a claim could still be made if the person is already incapacitated). It will also reduce the superannuation for the person’s retirement.

TPD

If you are unfit for your usual job or other suitable work long term because of COVID-19 or any other injury or illness, you might have a claim for a TPD lump sum under your employment super.

You can have more than one claim if you have multiple super funds when you last worked.

A TPD lump sum will not usually affect any income protection payments and counts towards the Centrelink assets test.

Get HELP

It’s really important to check what income protection and unemployment insurance policies you might have and to run the figures to see what you will end up with if you make a claim.

It will usually be worthwhile to claim but get advice first.

Contact Berrill and Watson and we will check for all cover you may have and advise you for FREE.

We will also do claims for you no win/ no fee and no upfront fees.

Telephone

Melbourne: 03 9448 8048

Brisbane: 07 3013 4300

Anywhere else in Australia:  03 9448 8048

Email

info@berrillwatson.com.au

Looking for advice on other super and insurance matters during COVID?

We provide free advice for all types of queries.

Visit “Coronavirus – Berrill & Watson support” for more details.

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We are Australia's best value superannuation/insurance law firm. Other law firms charge nearly double (& sometimes more than double) what we charge. So, if you get a quote from them, or have a cost agreement, ask us what we will charge you.


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