As part of my work assisting injured people to navigate the complexities of our legal system, I regularly deal with people who have sustained injuries which prevent them from working. The period in which they are unable to work can differ; sometimes it is only a short time (post-surgery, for example) but in other cases their injuries may preclude them from working in a role within their education, training or experience for the remainder of their working life.
Many superannuation funds provide default personal insurance coverage for total and permanent disablement, as well as death and income protection policies. I have seen many clients benefit from holding such policies of insurance when they sustain injuries which impact on their ability to return to work.
Unfortunately, during my practice, I have also come across clients who have inadvertently opted out of coverage or did not realise their default insurance had been cancelled.
During 2019, there were multiple legislative changes made to the Superannuation Industry (Supervision) Act 1993 (Cth). Some of these changes include superannuation funds having the ability to:
- Cancel a member’s insurance if their accounts have not had any contributions for at least 16 months; and
- Cancel a member’s insurance if the member’s balance reaches a minimal sum whereby the cost of maintaining their insurance policies would eat away at remaining superannuation.
If you are under 25 years of age, you also need to specifically opt-in to qualify for default insurance through your superannuation fund.
While the approach implemented by the change of legislation has been of benefit in preserving the superannuation balance of low-income earners or for people who have required extended periods away from work, it has also had a significant impact on those who have sustained injuries and find themselves unable to work, and without insurance.
Scenarios I have encountered in practice involving policies of insurance being canceled include:
- The members’ superannuation balance not being high enough to service the payment of insurance premiums due to them working minimal hours or performing contract work.
- The member being on maternity/paternity leave for over 16 months resulting in no contributions being made into their superannuation accounts.
- Members not responding to correspondence sent from the fund (or not updating personal details to ensure correspondence is received) for notifications as to changes or cancellation in coverage type.
In each of these scenarios, the insurance policies which were no longer available would have significantly helped each person during a period they were unable to work while undergoing surgical procedures and associated rehabilitation or in the longer term, upon finding out that they are unable to return to a role within their education, training or experience due to their injuries.
To prevent finding yourself in a similar situation:
- Ensure your personal information including your postal address and email address are updated with your superannuation fund to ensure you receive correspondence from them indicating any changes to your account and/or insurances. This will provide you with the opportunity to consider your options with respect to maintaining your insurance policies and prevent the unfortunate situation occurring of you no longer holding coverage for which you were unaware.
- Take the time to regularly review your insurance coverage, as it may not be sufficient for your needs.
- Check whether you work within an occupation where it may be of benefit to hold “own occupation” total and permanent disablement coverage, rather than “any occupation” coverage. Speak to a financial planner about this.
- If you hold income protection cover, make sure to check your waiting period as the periods can range from as little as 14 days or up to 90 days. If you are unable to rely on other avenues for income when you are injured, such as workers’ compensation benefits or sick/annual leave, you might find yourself in a tough financial situation making it difficult to focus on recovering from an injury.
- Contact a financial planner to seek advice as to your personal circumstances as you may require personal policies of insurance in addition to what you hold within superannuation.
This article is prepared to empower readers to review whether they hold personal insurance policies and at the level of coverage that they require. The purpose of this article is educational only and in no way provides advice. To seek advice on your personal financial situation, speak to a financial planner.
Associate Lawyer
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