New super laws: is my TPD insurance affected?

Workplace accident amputation

On 1 July 2019, the Federal Government’s Protecting Your Super Package Act comes into effect.

For Australian workers with superannuation accounts, it is important you understand how these changes will impact you now and in the future, especially if you have to stop work due to injury or illness.

Do I have insurance under my super fund?

Australian workers are provided with automatic death and disability lump sum insurance through their default super funds, which are called MySuper accounts. This is designed to protect Australian workers and provide affordable insurance cover in the event they have to stop work for any medical reason, such as illness or injury.

Automatic insurance in super, particularly total and permanent disability (TPD) insurance, has been very successful in providing millions of Australians with cover when they would otherwise have none. It’s also particularly valuable for people with pre-existing medical conditions who may have difficulties in accessing or affording private insurance.

What are the new laws?

The new legislation is called the Protecting Your Super Package Act and it comes into effect on 1 July 2019.

This follows on from the banking Royal Commission which showed that many bank-owned super funds were deducting excessive fees from account balances, despite providing substandard services. The package is designed to protect Australians’ super savings from unnecessary erosion by fees and insurance costs, as well as reduce unintended multiple low balance accounts.

The legislation includes changes to fees, the transfer of inactive low-balance accounts to the ATO, and stopping insurance for inactive members. 

How does this impact me?

Members of choice super products and MySuper funds will lose their automatic death and disability insurance if their account is inactive (no contribution received) for more than 16 months. 

Members with balances under $6,000 whose accounts have been inactive for more than 16 months will have their accounts paid to the Australian Tax Office (ATO) who will try to transfer it to an active super fund.

What if I ceased work due to injury or illness before my cover ceased?

Even if you lose your cover due to the reforms, you will still be able to pursue your TPD and income protection entitlements as long as you had insurance when you became ill or injured.

Our superannuation insurance team provide a free check for cover and you can contact them by calling 1800 305 568.

What if I stop work after 1 July 2019?

If you cease work due to injury or illness after these changes, you will only be eligible to claim your super insurance if you have cover when you stop work.  As above, you may lose that cover if your account is inactive or the account balance is less than $6,000.

What if I have an illness or injury but haven’t ceased work yet?

For those with injuries or other medical conditions who are still employed because you are ‘soldiering on’ or waiting for your condition to stabilise before deciding whether to permanently cease work, you may lose your cover if super contributions are not being made or the account balance is less than $6,000. 

Is there any way to avoid losing insurance cover?

Yes, it is possible to keep your automatic insurance cover by:

  • making sure you have $6,000 or more in your super account; and
  • making a contribution to your account (for example once a year) or contacting your super fund and opting in to default insurance cover.

We encourage members who are unsure about their insurance needs to seek independent financial advice about what cover is right for you before taking any of these steps. We can refer you to a reputable financial adviser if you don’t have one.

Here's an example

Garry stopped working in October 2017 due to a significant knee injury sustained in his job as a plumber. He has been receiving statutory workers' compensation benefits since. His employer has not been required to pay his super because he hasn’t earned any wages.  As at 1 July 2019, Garry's TPD insurance will automatically cease. 

If Garry can’t return to work then he can still claim he became TPD from October 2017 when he was insured and he should make a claim.

However, if he returns to work on light duties he probably won’t be eligible for new TPD cover for his knee injury - so if he ceases work again in the future, he won’t have a claim.

If you have suffered an injury or illness that has impacted your ability to work in any way, you can contact our superannuation insurance team by calling 1800 305 568. Our team of experts will assist you to identify if you have any insurance cover and may be able to act for you to access that cover.

RELATED LEGAL SERVICES: Superannuation and insurance

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Liam Hanlon

Maurice Blackburn Brisbane
Liam is a lawyer working in superannuation, life and general insurance claims in our Brisbane office. Liam has a particular focus on litigating total and permanent disablement and income protection matters. He also acts on behalf of clients in financial advice disputes. "I ...

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