Many people assume they have appropriate cover in their insurance policies. However, it is important to be aware of the varying processes and policies between superannuation funds to ensure your rights to benefits are not compromised. Attwood Marshall Lawyers Senior Paralegal, Amy Lewis, explains how terminal illness claims can be made through a superannuation policy.
Insurance benefits that may be attached to superannuation policies
Death Benefits (Life Insurance)
While most people are aware they hold life insurance cover (also known as death benefits) attached to their superannuation fund, many do not realise this cover can be paid out early should they be suffering from a terminal illness.
Generally, death cover is only paid out upon the death of an individual. The funds are usually paid to the deceased’s dependents or their estate depending upon the deceased’s prior instructions. You also have the option of signing a ‘binding death benefit nomination’ which can bypass your estate and leave the benefit to a specified beneficiary.
If someone is diagnosed with a terminal illness, this insurance benefit can be paid out immediately along with any superannuation account balance. Policies differ amongst the superannuation funds and insurers, but usually you can get access to these funds provided you have medical evidence confirming you suffer from a terminal illness and prognosis is that you will die within the next 12-24 months.
Getting access to these funds provided by terminal illness – or death benefits (as well as the account balance for your contributions), can allow a person to provide for their family and live the rest of their life the way they wish. The funds give the person suffering from a terminal illness options for the remainder of their life, including the ability to fund expensive treatment options.
A person can use terminal illness insurance payouts to go towards:
- paying for private medical treatment
- trying new therapies
- paying for accommodation close to specialist and medical facilities
- the cost of palliative care
- replacing the income of a family member who takes time off work to assist you
- taking a holiday or enjoying time with family
- securing a home or property for children or dependant spouses
If someone has multiple superannuation accounts, it is possible you have multiple terminal illness claims should you have active insurance cover for each account. You can do a quick check on the ATO website to see what superannuation policies you hold by clicking here. Many people do not realise how many superannuation accounts they have and quite often there may be death and TPD cover still current.
What is a Terminal Illness Claim?
A terminal illness claim is a request from you to your superannuation provider to be paid your account balance and death insurance benefits. The time frames for your prognosis and the terminal conditions can differ from policy to policy, but this is a standard pre-requisite for cover.
To make a claim:
- Check your policies and gather your paperwork as soon as you are able after your diagnosis and contact our office for a free initial appointment.
- We will need to confirm you hold the relevant insurance through your superannuation fund and that it is current.
- You will be asked to sign a simple authority allowing us to contact the superannuation fund and obtain your account details.
- Two of your treating medical practitioners (usually your GP and specialist) must certify you are suffering from a terminal illness and will likely pass away within a determined period of time. This period varies between 12 – 24 months depending upon the fund.
- Sometimes there may be issues with the type of illness and whether your policy covers the condition. Quite often there are issues with whether the policy is active or complex arguments about when the condition was acquired, especially if the cover ceases at a certain age.
- We take on your matter on a completely ‘no win, no fee’ basis and attend to payment of any costs of medical reports needed so you are not out of pocket. If we don’t succeed in getting your payment, we don’t charge you. It is as simple as that.
- We are upfront with our fees and give you an agreed fixed fee amount, so you know where you stand. No unpleasant surprises at the end of the case. You have enough to worry about!
Attwood Marshall Lawyers aims to take the stress out of making a superannuation claim and once we obtain the details of your superannuation fund/s and treating doctors, we take care of the rest for you.
Superannuation funds slow in processing claims or denying lump sum payouts
There have been reports of people waiting excessive times when trying to make a claim for early release of super or life insurance benefits.
The Life Insurance Code of Practice, which is mandatory for all members of the Financial Services Council, allows insurers up to six months to pay claims. If you are terminally ill, six months is a completely unacceptable amount of time to wait.
Nick Kirwan, Senior Policy Officer at the Financial Services Council says 92% of claims are paid within the code’s six-month timeframe. This includes claims for total and permanent disability, trauma and death as well as terminal illness. The council does not have data showing how long its life insurance members take to pay out terminal illness claims.
Some superannuation providers have also gained attention for introducing confusing policies where they deny lump sum payouts to terminally ill members.
A report in December 2019 described a stonemason worker’s distress when he was denied a lump sum payout of his total permanent disability (TPD) insurance by his superannuation fund, Sunsuper.
Mr Garry Moratti was diagnosed with silicosis, a lethal lung disease, as a result of his stone-masonry work, and was given a life expectancy of four to five years. He assumed he would be eligible to claim for benefits for his terminal illness under his TPD insurance. In most instances TPD claims are a lump sum payout awarded to a member who has been permanently disabled and is unable to ever work again.
Earlier in 2019, Sunsuper changed their policy around TPD insurance providing eligible members drip-fed payments in instalments over six years. Sunsuper requires claimants accessing these benefits to be continuously assessed in order to receive the benefits. In Mr Moratti’s case, this was an unsuitable scenario as he was terminally ill and was not expected to live the six years it would take to receive his full benefits.
Mr Moratti was devastated by the situation as the lump sum payment would have helped him enjoy what time he had left and support his family, without the added stress of having to deal with the insurance provider regularly and being given restricted access to vital funds.
The difference between TPD benefits and Terminal Illness benefits are not widely understood and it is important to investigate what insurance policies are available to you under your superannuation account and how benefits may be paid out.
Get the right advice before you claim!
We do our best to get your claim lodged with the insurer as soon as we can and stay on their case until we get a resolution for you. Most insurers are pretty good dealing with these claims, but we find that having experienced lawyers in this area acting for you certainly helps to keep them honest. Many clients have tried to lodge the claims themselves or have allowed their financial planner or insurance agent to assist. It is very important that you engage experienced lawyers in this area, as you only have a limited time and ‘one crack’ at the policy payment. Sometimes, mistakes are made in the application which can delay or even compromise your payment. Please make sure you get the right advice.
Read more: Different types of life insurance cover
Read more: What is a Total and Permanent Disablement benefit?
