Mental health and disability insurance: Understanding your rights

Whilst we still have a long way to go, people are becoming more open about discussing mental health issues.  Stress, depression and anxiety are no longer as taboo as before and a more mature conversation is developing. In fact, each year approximately one in every five Australians will experience a mental illness. That makes mental illnesses the third leading cause of disability in Australia.

Insurers have become wary of mental health disability claims and it can be difficult to get cover for such claims. What many people don’t know is that the automatic insurance provided through your superannuation fund will often pay out much needed funds if you cease work due to a mental health condition. 

When applying for a stand-alone policy, you need to disclose any mental health issues you've had. As a result, you might see a hike in your insurance premium, or you may face a mental health exclusion, which means you can’t get insurance cover on claims that relate to your mental health.

Disclosing a pre-existing illness or injury

Traditionally, when you buy insurance, you take out a policy directly with an insurer. As part of that process, you complete an application and disclose your pre-existing medical history. The insurer then reviews your application as part of its underwriting process to determine whether to offer you a policy and on what terms.

If you tell the insurer about significant symptoms or a diagnosis of a psychological nature, it may not offer you a policy or may include a mental health exclusion clause. It’s because the insurer may consider you an unacceptable risk.

If you fail to disclose your medical history and later make a claim, the insurer may try to cancel your policy and deny your claim – even if the cause of your disability claim doesn’t relate to your pre-existing condition.

Covered by superannuation insurance

The good news is that most super funds provide automatic insurance cover for total and permanent disability (TPD), which will pay a lump sum benefit if you can no longer work due to injury or illness, including a psychological illness. You receive cover simply by being a member of a default super fund, called a MySuper product. This type of insurance isn't underwritten in the same way as direct insurance policies. It can even cover claims for conditions that existed before you joined the super fund.

For example, we recently represented a client who experienced depression during a divorce in his 20s. He made the choice to see a psychologist and take antidepressants. When he later applied directly to an insurer for disability insurance, the company rejected his application because of his prior mental health issues.

Later, at age 37, he witnessed a nasty accident in his workplace and developed post-traumatic stress disorder (PTSD) that caused him to stop work. We investigated his super insurance entitlements and discovered he was eligible to claim a TPD lump sum of $100,000, which had been automatically underwritten when he joined his super fund. We helped him make a successful claim which allowed him to pay off his mortgage and keep his home.

Claiming your benefits

Whilst every policy is different, to win a TPD benefit you're usually required to provide medical evidence supporting that you'll never return to the work you’re suited for by education, training or experience. That usually pays a one-off lump sum benefit.

Some super funds provide income protection insurance as well as TPD. That pays a monthly benefit if you can’t perform the duties of your usual occupation. These benefits can be payable for two years, five years or sometimes to the age of 65, as long as you continue to meet the policy definition. 

Some funds provide both income protection and TPD, but will stop income protection payments if you’re paid a TPD benefit. Seeking legal advice before making a disability claim can help you maximise your full insurance entitlements.

If you’re a member of more than one super fund, like many Australians are, there’s a good chance you can make more than one TPD claim if you have to cease work. It’s important to get advice and make sure you find all insurance benefits your entitled to claim.

Balancing wellbeing in the workplace

You don't have to tell your employer about a medical problem unless it poses a risk to your workplace safety. If you have a mental health issue, you should discuss it with your doctor before deciding to inform your employer. Although most employers may be sympathetic and understanding, this isn't always the case. It’s not unusual for employees who disclose a mental health condition to face discrimination. This can include: 

  • being targeted for redundancy
  • being overlooked for promotion
  • being demeaned or ridiculed
  • not receiving a pay rise.

If this happens, you may have a claim for unlawful dismissal or workplace discrimination. You may also be entitled to income protection or TPD insurance benefits if you stop working.

Keep in mind that sometimes making an unfair dismissal or workplace discrimination claim can disadvantage your disability insurance claim. That’s because a workplace discrimination claim usually involves you claiming that you’re medically able to do your job. A life insurance company may use that as a basis for denying a disability insurance claim, which requires evidence that you can’t do your job. It’s important to get legal advice before you resign, stop working or pursue any claim against your employer. 

When looking for the right insurance to cover your mental health, it pays to speak with a legal professional. Find out more about your superannuation insurance entitlements.

Mental health and disability insurance

RELATED LEGAL SERVICES: Superannuation claims

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Josh Mennen

Maurice Blackburn Brisbane
Josh Mennen is a Principal Lawyer in the Superannuation and Insurance practice in Maurice Blackburn's Brisbane office. He regularly visits Melbourne, Sydney and Adelaide. He has practiced predominantly across superannuation, insurance, financial advice and consumer credit disputes. Admitted to practice in 2007, Josh has ...

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