At present, we are seeing a lot of people who’ve always been employed ceasing work either permanently or temporarily due to the COVID-19 pandemic. Most of these workers will have a superannuation fund and many will have TPD insurance and death benefits within that fund. Others will have income protection benefits also. Losing your job could see a loss of TPD insurance.
In many cases, the insurance coverage which people are offered through super is the only disability insurance coverage that they have. That is, for many Australians who cease work due to illness or injury before retirement age, these disability benefits are the only benefits they’re entitled to other than those paid by Centrelink. For this reason, these benefits are super important.
For other people who have lost their job due to the pandemic, we anticipate that if they become unwell now, their TPD claims will be assessed under the more difficult Activities of Daily Living TPD test.
What are TPD eligibility conditions?
Many of the group policies have what are called “eligibility” conditions or criteria, written into the policies to make sure that only those superannuation members who are working (or working at full capacity) are covered by the insurance policy terms.
On the one hand, this is a way of making sure that superannuation fund members who are not working are not paying for insurance that they don’t need. On the other hand, these eligibility conditions are a way that insurers make sure that they are not insuring people who are already sick and injured.
“Active Employment” and “At Work” tests
These eligibility conditions are often referred to as “Active Employment” or “At Work” tests. If you lose your job or have your hours reduced, you may no longer satisfy the Active Employment or At Work eligibility conditions.
Usually, these terms are defined in the policy and the definition requires that you be working a minimum amount of hours each week (for example 15 hours) without being restricted due to injury or illness to be eligible for ongoing insurance cover under the group policy.
Under other policies, in addition to the eligibility conditions, we see that the definition of TPD which is applied to people who are not working when they become sick or injured is not the normal work-based definition of TPD, but an Activities of Daily Living (ADL) test.
ADL TPD tests focus on your functional capacity to do certain activities and are more difficult to fulfil than the work-based TPD definitions.
Losing your job due to the pandemic has a lifeline in relation to TPD insurance
Fortunately, the Financial Services Council (FSC) has released a statement at the beginning of this pandemic which said that all life insurance companies that are members of the FSC will not assess your TPD claim under the Activities of Daily Living TPD test if you’re unemployed due to coronavirus when you become sick or get injured.
This is good news for those people who have lost their job but have a chronic illness, or for other reasons, they want to maintain their work-based TPD insurance coverage.
However, we still anticipate that we will see people whose work has been interrupted by the pandemic and who are disadvantaged if they become unwell while they are off work. This will be the case particularly for those who have income protection coverage but have no income immediately prior to becoming unwell because they are already off work due to the pandemic.
Acting fast if you cease work due to injury or illness is critical
It is very important that if you cease work because of injury or illness, you seek advice to make sure that you access your full disability insurance entitlements for either TPD or income protection.
Also, if you make a TPD claim and your claim is rejected because the insurer says that:
- you weren’t at work;
- you weren’t in active employment; or
- your claim has been assessed under an ADL definition,
there may be things that can be done to appeal this decision. If this applies to you, contact us directly by phone or email for some free advice about what steps can be taken to appeal the decision.
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