Superannuation and Insurance to Support Clients through COVID-19

The economic impacts of COVID-19 have seen various policy responses including new provisions allowing people financially impacted by the pandemic to access their superannuation early. While this is a welcome relief for many, the impacts for workers with chronic and pre-existing health conditions can be detrimental due to the risk of losing automatic life and disability insurance provided via their funds.

The financial stress created by a loss of earning capacity often compounds the difficulty faced by clients managing chronic health issues or trying to recover from a debilitating health event. Understanding the insurance entitlements commonly held through super can empower occupational therapists to encourage clients to seek help and access life changing benefits. This can help clear a path to better recovery and/or ongoing management of health conditions.

Insurance through Super

Insurance is an important feature of Superannuation as it is often the only form of Life & Disability Insurance people have. It is usually provided automatically which means almost all employees will be covered. If a client has stopped work due to any injury or illness, they may be able to access these entitlements, however many individuals are unaware they have cover through their fund.

Health professionals can play a vital role in bringing attention to these entitlements when they can have a meaningful impact.

Types of Disability Insurance

There are two common types of disability insurance offered through super: Income Protection (IP); and Total & Permanent Disability (TPD) benefits:

• TPD benefits are usually lump sum payments you can claim if you are unlikely to return to a job you are reasonably suited to by education, training or experience due to any medical condition.
• IP benefits are usually monthly payments you can claim if you are unable to perform your job, or an important duty of your job. Usually you can still make a claim if you have returned to work, but are earning less because you cannot perform the same hours or duties due to your medical condition.

Importantly, these insurances often cover pre-existing conditions and the condition claimed does not need to be compensable. For this reason, people with a wide range of chronic health conditions, and those who experience debilitating non-compensable health events such as strokes will often benefit from a claim.

How are These Benefits at Risk?

People facing financial stress as a result of COVID-19 have been able to access their superannuation account balance early. Eligible individuals could apply through the MyGov website to access up to $10,000 from their superannuation balance before 1 July 2020, and up to a further $10,000 from 1 July 2020 (more information can be found here).

Many people have or will choose to take this option, however, by doing so without consideration of the broader impacts, there is a risk that they could lose their valuable life and disability insurance. Simply put: if a client withdraws their superannuation account balance, and there's not enough money left over to pay premiums, then their insurance may stop. 

What Can I Do?

If your client is considering withdrawing funds from their super account, encourage them to seek advice about the impacts to ensure they are making an informed decision.

If they have a medical condition that may cause them to cease work in the future it is very important that they don’t lose their insurance entitlements. If they’re facing a period of unemployment which may last for 16 months or more, or if they aren’t sure how much money they will need to leave in their account to meet the cost of ongoing premiums, they should contact their superannuation fund as soon as possible to find out how to retain their cover.

Importantly, if your client can’t work because of their health condition they may already be able to claim on their default insurance through super. Maurice Blackburn are proud to partner with OTA and can offer referred clients a free super check. They will learn about their entitlements and be empowered to make an informed decision.

It costs nothing to know where you stand.

About the Author
Maurice Blackburn is OTA’s preferred legal partner, and Australia’s leading social justice law firm with over 30 offices and more than 1000 of the country’s most respected legal professionals. Therapists and clients can contact 1800 196 050 or Spreclaims@mauriceblackburn.com.au to find out more.