Life insurers won’t falter on COVID-19 cover

By Grace Ormsby

May 19 2020
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Workers who have lost their jobs, been stood down or are working less hours as a result of COVID-19 won’t be negatively impacted by changes to their total and permanent disability (TPD) cover.

The Financial Services Council (FSC) has outlined the life insurance industry’s new initiative, which will see participating life insurers “support Australians through the unprecedented public health and economic impacts of COVID-19”.

According to FSC CEO Sally Loane, the initiative aims to ease any concerns people may have with their TPD cover by preventing any changes to cover being automatically triggered due to COVID-19.

“Millions of working Australians have TPD cover through superannuation which pays out a lump sum if you become totally and permanently disabled because of illness or injury,” Ms Loane said.

With a claim for TPD assessed on whether the person is expected to be able to work ever again, the CEO flagged that usually 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. Broadly speaking, the fewer hours you work, the stricter the definition used to assess your TPD claim,” she explained.

“For most people, changes to TPD definitions happen only after their working arrangements have changed for six or 12 months (to cover parental leave, for example). For others, this change can happen after three months, depending on the particular policy wording.”

She highlighted how this means some Australians who lost their job, were stood down or had reduced working hours due to COVID-19 could see their TPD coverage change from 11 June 2020.

“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-19 pandemic declaration.”

The initiative will align with the current JobKeeper payment scheme — up until 27 September 2020.

All claims that are related to this period must be lodged before 1 January 2021.

Ms Loane said the announcement had been timed “to ensure the initiative is up and running before anyone is adversely affected”.

Life insurers will confirm their participation through a statement on their website.

So, what does it all mean?

The initiative applies to existing life insurance cover. It will be applicable to you, and be able to help you, if:

You were working in your normal capacity on 11 March 2020.
You have had reduced working hours or lost your job due to COVID-19 since 11 March 2020.
You have become disabled as a result of an illness or injury between 11 March 2020 and 27 September 2020 (inclusive).
You have maintained your TPD cover at the time you became totally and permanently disabled.
You lodge a completed claim form on or before 1 January 2021.

If you meet the above criteria, the FSC said: “On an ex-gratia basis, participating life insurers will assess your claim using the applicable disability definition based on your working arrangements as at 11 March 2020.”

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

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