With any TPD insurance coverage through superannuation there will be certain criteria that you must meet to be covered. Automatic coverage or default coverage is often subject to conditions. These are known as eligibility criteria. This set of criteria will differ for each fund but there are some common issues.
Criteria 1 – Membership
The most obvious of the criteria is membership in the relevant superannuation fund. Membership can often mean more than just completing the forms to open an account. Your application for membership must commonly be accepted by the trustees of the super fund to be effective. Until you receive confirmation of membership from the fund itself, do not assume you are a member. Workers can often receive verbal assurances from their employer’s payroll section or even written confirmation on their payslip that they are members but that is not adequate proof of membership.
Criteria 2 – Contributions
For employer based superannuation accounts another necessary criteria is the receipt of contributions into the account. Employers must make a compulsory contribution of currently 9.25% of your annual wages into superannuation to a fund of your choice. Sometimes TPD insurance coverage does not commence until a contribution is actually received by the super fund. Often coverage commences from the date of receipt of that contribution as opposed to the period of work performed. Employers are required to advise employees of the contributions being made on their behalf. Commonly they do this with a notation of contributions made on payslips. The fact that a contribution appears on a payslip does not mean that contribution has actually been paid to the super fund. Commonly employers will make a quarterly contribution to a super fund for all employees. Sometimes financially desperate employers will not in fact pay the contributions at all. You must check your super account to ensure that regular contributions are being received.
Criteria 3 – Able to perform duties
In addition a worker must usually be capable of performing their usual duties without restriction from injury or illness and not receiving any income support payments such as workers compensation or Centrelink benefits for injury or illness reasons. If they are not then their TPD cover may be limited to events occurring after coverage started.
Sometimes during the course of your membership of a super fund the trustees may change your insurance arrangements by for example installing a new insurer or increasing coverage. Those changes will also be subject to eligibility criteria. It is advisable to always inform your super fund of any changes in your employment circumstance including a change of job description, increased or decreased hours, extended leave periods including gap years, overseas postings, etc.
Regular checking of your insurance coverage and having conversations with your super fund are essential to ensure your coverage is current and suitable to your circumstances.
Case Study 1
Bob is a 45 year old construction worker who has been diagnosed with a terminal illness. He has been in his current job for 18 months. At the commencement of employment Bob was asked where his super should be paid. He nominated a fund and filled in some forms. Since that time his payslips have shown regular amounts being paid to that fund. On diagnosis Bob rings the super fund to check how to claim only to find there is no fund in his name because the employer has not followed through with the process to open an account and has not paid contributions for 18 months. Coverage is denied.
Case Study 2
Jane is a 35 year old female worker and a member of a super fund. Her employer has been regularly making contributions to the fund. Jane becomes ill and permanently reduces her hours of work as a result. After reduction of her hours the super fund enters into new TPD insurance arrangements which increase the lump sums payable on TPD. Subsequently Jane’s condition deteriorates and she is no longer able to work because of the same illness. Jane will not be entitled to the increased coverage because she was restricted by illness at the time the increased coverage commenced. Jane may still be entitled to the lower level of coverage.