Making a Claim for TPD in Australia - What All Applicants and Policyholders Should Know
It is crucial that all TPD Insurance policyholders and anyone looking to take out TPD cover to have a clear understanding on the conditions around claiming TPD in Australia. The process of submitting a claim to actually receiving a benefit can take months and be complicated. An understanding of this process can ensure that the right steps are made by the policyholder and a successful claim can be achieved.
This article will outline the claims process for TPD insurance that is held within a superannuation fund and for cover that is held outside a superannuation fund. In doing so it will offer key advice to policyholders on how to best prepare for the event of a claim to ensure the process runs smoothly and that there is no delay in payment.
When Can a Total and Permanent Disability Insurance Claim Be Made?
A TPD claim benefit can be received when the policyholder has satisfied the definitions of TPD as defined by the insurance company or Super Fund in which their cover is held. It is extremely important for policyholders to be clear on what definition their policy falls under to avoid any surprises in the event of disablement. Generally Total and Permanent Disablement will be considered under either “Own Occupation” or “Any Occupation”
- Own Occupation: The policyholder has become disabled and is unlikely to ever return to full time work in the position of which they are employed for. Own Occupation TPD Insurance is no longer offered through superannuation. This came into effect July 1, 2014.
- Any Occupation: The policyholder has become disabled and is unlikely to ever be able to engage in any form of regular paid work again for which they may be suited to by education, experience or training.
Criteria for a Successful TPD Claim
Most providers will also require the claimant to be unable to perform the duties of their occupation for at least three months before turning the age of 65.
Conditions of the TPD cover are also often subject to the occupation category of the policyholder.
Partial Disablement Feature
Some insurance providers will provide the option for Partial Disablement whereby as a result of sickness or injury the policyholder is not totally disabled and is able to work in their own occupation at a reduced capacity. As a result, the insureds monthly income is less than the pre-disability income. This must be certified by an approved medical practitioner.
The requirements of partial disablement feature generally comes under an hours or duties based definition.
- Hours Based Partial Disablement: Benefit paid if policyholder has returned to work following being partially disabled for entire duration of waiting period and is able to perform duties in their occupation for defined number of hours, is earning less than their pre-disability income and is under medical care.
- Duties Based Definition: Benefit paid after policyholder has returned to work following being totally disabled and is not capable of performing the duties essential in producing their income and is forced to earn less than their pre-disability income.
This benefit is determined using the following formula:
(Pre-disability income - post-disability income) / (pre-disability income x monthly benefit)
Some policies will provide this partial payment under certain defined conditions suffered by the policyholder. This may include the permanent loss of the use of;
- One arm, or
- One leg, or
- Sight in one eye
Mental Illness, Depression and TPD Claims
One of the most common claims for disability insurance in Australia in recent years is for Mental Illness. As such, life insurance companies are becoming increasingly stringent around the requirements for a successful benefit payment. In 2006 alone there was $206 million paid out in TPD claims in Australia, 20% of which were related to mental illness (insuranceandrisk.com.au). In order to receive the TPD benefit payment for reasons related to mental illness, the condition must be severe enough for the policyholder to be required to take time off of work.
If an applicant has experienced a mental illness in the past, this will be taken into consideration by the insurance underwriter. It can be extremely difficult for underwriters to assess the risks of mental illness as there is such a great range of forms with different degrees of severity. Underwriters will in most cases require a medical attendant report in order to assess the applicants condition and the level of risk they carry.
Difficulty of Assessment of TPD Claims for Depression and Other Mental Illnesses
Policyholders should be aware that it can be difficult to prove that they will be unable to return to work again on account of mental illness. The episodic nature of mental illnesses can make it difficult for diagnosis to be formed.
Considerations for TPD Claims Related to Depression and Mental Health
- The type of treatment prescribed by practitioner and the regularity of that treatment. This consideration is of particular importance for claims that are late in submission.
- Benefit payment for a mental health claim may be deferred if it is believed that the permanency and severity of the insureds conditions is unable to determined. This can be prolonged until all treatment options are trialled.
- Definition of total and permanent disablement in policy. For claims based on disability preventing individual from their own or any occupation as a result of work related stress, an underwriter will assess if they would still be unable to perform their duties at another place of employment or if their duties at their current work were adjusted.
Superannuation TPD Claims
Some superannuation funds will now offer a default level of TPD cover for members. Members can check if there is TPD cover in their super fund by contacting a fund representative and requesting a copy of their online statements.
Payment of Total and Permanent Disability Claims in Superannuation
In order to receive a TPD benefit from their super fund a member must;
- Satisfy all conditions of the fund insurance contract.
- Satisfy the permanent incapacity definition as stated under super law.
- Satisfy “disability super benefit” definition stipulated under Australian tax law. This will allow the policyholder to claim an additional tax-free portion on the lump sum benefit.
- Fund trustee must be satisfied that the insured has met the conditions of the policy and is unable to engage in employment that they have are qualified in by education, training or experience.
TPD Claims Process: Inside Superannuation
- Contact Super Fund: Policyholder to contact their super fund after which they will be provided with necessary claim documentation. They will also need to provide additional documentation. This might include;
- Identification - Birth Certificate, Drivers Licence, Passport
- Existing medical reports
- Medical evidence to support claim
- Submit Claim: Claimant to sign their claim statement and attach to all necessary documentation. This will then be provided to their Case Manager. A Case Manager provides assistance throughout the claim process, ensuring all of the necessary documentation is received.
- Organisation of Claim by Case Manager: Case Manager will assess policyholders claim to determine whether they are eligible to receive a TPD benefit. They will usually contact the claimant's employer to receive a written statement as to why they ceased work.
- Claim is Assessed By Insurer: An insurance provider will assess the documentation submitted. In some cases further evidence may be require including;
- Doctors reports
- Further medical examination with an independent specialist
- Further information from the claimant's employer
- Further information from the claimant
- Claim is Assessed by Insurer: The insurance provider will assess the claim and determine if it is;
- Accepted: Claimant contacted with claim payment options.
- Declined: Claim is deferred while the provider assesses full extent of disability and its permanency. Claim is denied as the insurer has deemed the claimant has not satisfied the conditions of the policy.
- Deferred: Claim is deferred while the provider assesses full extent of disability and its permanency.
If the claim is deferred or declined it will be referred to the fund trustee who will review the decision made by the insurance provider on the claimant's behalf.
Payment of TPD Claims in Multiple Super Funds
It is not uncommon for people to have TPD insurance that has accumulated in multiple funds that have been opened by different employers. It is possible in some circumstances for the policyholder to claim multiple benefits at the same time. However it is important that the claimant carefully checks the conditions of each fund before submitting multiple claims at the same time.
TPD Claim Time Limit
There is no time limit on when an TPD claim can be made for a benefit payment for TPD held within Superannuation. That said, there are time limits placed on when an appeal can be submitted for the refusal of a TPD claim. Legislation states that the Superannuation Complaints Tribunal can only review a complaint that has been made within two years after the making of the trustees decision of which the complaint is related to.
TPD Claims Process Outside of Super
Claiming standalone TPD Insurance is quite similar to claiming TPD held inside of Super though there are some differences between the two processes. Each claim process may differ depending on the type of claim and the insurance provider though in most cases it follow the following steps.
Steps to make a TPD claim:
- Contact the insurers claims team: The claims team will provide the policyholder with the necessary claims form. Your financial adviser may assist you fill out the documents if necessary.
- Prepare Necessary Documentation: This will usually include;
- Completed claim forms
- Medical attendants statement completed by certified medical practitioner giving verification of the illness/injury.
- Bank details may be required to allow provider to deposit any benefits into nominated account.
- Details of previous health claims may be required.
- Submit Claims Documentation: Completed claim documentation to be submitted to insurance provider.
Total and Permanent Disability Claims and Duty of Disclosure
It is crucial for anyone looking to take out protection cover that they fully understand their obligations under a “duty of disclosure”. In the event that a claim is made, this is the first document that will be checked against the claim application form.
Before applicants enter into an insurance contract for TPD cover, they are required to disclose any relevant information that may be required by the insurance provider to allow them to assess your situation. This is known as the duty of disclosure.
This duty of disclosure is legally binding and applicants must disclose any relevant known information to avoid legal consequences for not informing the underwriter of information that may affect the policy.
In the event that the applicant has failed to comply all information in their duty of disclosure and the policy is less than three years old, the insurer is within their rights to check the duty of disclosure and terminate the contract. In the event that the insurer finds that the duty of disclosure is fraudulent, they may also reduce the sum-insured in accordance to the premium that would have been payable had the correct information been disclosed at the time of application.
Appealing a TPD Insurance Claim
In the event that the claim is denied by the Insurance provider, there are certain steps that can be taken to have the decision reviewed.
1. Submit a Complaint to the Insurance Provider
Policyholders should contact the chief underwriter of the insurance companies claim department. It is important to Take the time to set out the complaint to the underwriter in full with evidence to justify request for further review. Policyholders should request that the chief underwriter addresses each issue.
The policyholder may be required to receive further medical documentation from their doctor. A more comprehensive report may be needed if the claim is to undergo further review.
2. Submission of Complaint to the Insurance Providers Internal Dispute Resolution Service
If the policyholder is not satisfied with the response received by the underwriting division they are able to write to the Complaints and Disputes Resolution Manager of the Company. Each insurance provider is required to have this department under standards set by the Australian Securities and Investments Commission.
3. Submit Complaint to the Financial Ombudsman Service
If the claimant is not pleased with the response from the provider they are able to write to the Financial Ombudsman Service. All claimants will need to undertake the previous steps with the insurance company before contacting the Financial Ombudsman Service.
Preparation is Key for a Successful Total and Permanent Disability Insurance Claim
As with any form of protective cover, a successful claim for TPD will be the result of the insured clearly understanding the conditions of their policy and what events they are covered for. This goes hand in hand with disclosing all known relevant information at the time of application to the insurer and notifying the provider of new conditions that may not be covered as they surface. Policyholders who take the gamble of not disclosing important details are gambling their chance to receive a payout for events that could bring great financial hardship. In addition, understanding the actual claims process for cover held within and outside of super will ensure that the overall process is executed smoothly and there is no delay in the payment of their claim.