AVOID THE TRAP: CHECK THE DEFINITIONS
Check whether the total and permanent disability (TPD) cover you have through super provides you with an adequate financial safety net.
If the dollar amount of cover is too low and/or the definitions of disability are too restrictive, it may be worth looking at what’s available outside super.
Insurers offer two main types of TPD policy: any occupation cover and own occupation cover. Although they sound similar, they are very different.
Under the former, you must be unable to work again in any job suited to you based on your previous training, education or experience. Or any job you can become suited to with education or training. While the premiums are cheaper, the policies have many exclusions and restrictions that make it harder to claim and offer less likelihood of a payout.
Under the second type of cover, you must be unable to work again in your own occupation, or the job you were working in before your injury or illness. However, this more generous cover is not available through super.
Insurance specialist Roy Agranat, at Fairbridge Financial Services, says one solution is to get your own standalone cover from an outside insurer that allows you to pay the life and any occupation TPD definition premiums from your super account and the own occupation TPD premiums personally. The personal premiums cost is about a third of the TPD premium.
“This way fund members can access the more favourable own occupation definition and still pay the majority of their premium with before-tax dollars.” He says another advantage of having standalone cover is it is portable and not a problem when switching funds. “If you decide to change super funds, you can simply arrange for the premiums to be drawn from the new fund.” Agranat points to another disadvantage of cover in super. “Fund trustees can change the definitions of TPD at any time and apply them retrospectively.”
Before changing your default cover, get professional advice to help you navigate what is, essentially, a very complex environment.