Unemployment won't affect TPD

19 May 2020

The Financial Services Council (FSC) has announced that people who lose their job, are stood down or have reduced working hours due to COVID-19 will not have their total and permanent disability (TPD) cover affected.

The initiative – on behalf of participating life insurance member companies – was aligned with the current JobKeeper scheme and would run to 27 September, 2020.

The initiative applied to existing life insurance cover and was designed to help if:

  • You were working in your normal capacity on 11 March, 2020;
  • Had reduced working hours or lost your job due to COVID-19 since 11 March, 2020;
  • Had become disabled as a result of an illness or injury between 11 March, 2020, and 27 September, 2020, inclusive;
  • Maintained your TPD cover at the time you become totally and permanently disabled; and
  • Lodged your completed claim form on or before 1 January 2021.
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Sally Loane, FSC chief executive, said the initiative aimed to ease concerns people had with their TPD cover by preventing changes to cover being automatically triggered because of COVID-19.

“A claim for TPD is assessed on whether the person is expected to be able to work ever again,” Loane said.

“For this reason, the TPD definition used to assess a claim is based on the person’s recent working arrangements. 

“Typically, this depends on the number of hours the person was working and whether they were in casual work before the illness or injury happened.

Loane said for most people, changes to TPD definitions only happened after their working arrangements had changed for six to 12 months, but even in three months in some cases.

“What this means is that some Australians who lost their job, were stood down or had reduced working hours due to COVID, could see their TPD coverage change from 11 June, 2020,” Loane said.

“To address this, today’s announcement ensures that if you make a TPD claim resulting from an illness or injury occurring since the pandemic has started, participating life insurers will assess your claim based on your working arrangements as at 11 March, 2020 – the date when COVID-19 was declared a pandemic – meaning you keep the cover you had based on your working arrangements before the COVID pandemic declaration.”

The announcement was timed to ensure the initiative would be set up before anyone was affected.

As of the end of 2018, there were over 7.5 million Australians with TPD through their group superannuation policy and over 25,000 claims were lodged in 2019.

It followed the FSC life insurers commitment to frontline healthcare workers not being prevented from obtaining life insurance due to potential exposure to COVID-19.




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What about IP claims where eligibility criteria is impacted by income reduction or job loss due to COVID-19?

Well, this is probably where an Agreed Value IP contract may be very valuable where income is not assessed at the point of claim. If it is a Partial Disability claim, it is assessed as an indemnity calculation based on loss of income.
What about if the medical advice for a Partial Disability claim states that you are medically capable of working 3 days a week, but you have lost your job and your income is zero ?
How does an insurer and claims assessor approach this situation ?
However, with anyone needing to make a group IP claim under a superannuation fund, it may be impossible if your income has ceased at the time of claim as the Indemnity contract may not allow an averaging income calculation.
It may also require you to be totally disabled for a period prior to being able to claim Partial disability benefits.
If you are only deemed Partially Disabled and have lost your income, I cannot see this being a very satisfactory outcome at all.
There are many questions that need to be answered in regard to how claims will be assessed.

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