Anita is an anaesthetist working in the public health system in Brisbane. She had recently finished her studies and been offered personal insurances under a government-sponsored superannuation fund.
Wanting to be confident that the offered insurance provided a long-term safety net in case of accident or injury, Anita approached us for advice. We examined the product disclosure statement in detail and discussed the cover in plain English with Anita, highlighting some concerns.
Total and permanent disablement insurance (TPD)
The TPD insurance offered to Anita contained an “any occupation” disability definition, which means that should Anita need to make a claim against the policy, the question would be asked if she would be unlikely ever to be able to work again in a job for which she is reasonably qualified by education, training or experience. However more worrying was their definition also allows the insurer to asses if she can do new occupations after undertaking rehabilitation and training programs. Understandably, this situation would be unacceptable as it does not reflect the considerable investment Anita put into attaining her specialist training.
The inclusion of an “any occupation” disability definition is standard for TPD insurance offered by Australian superannuation funds, which is why we advise our clients to hold additional insurance outside of superannuation which provides an additional “own occupation” disability definition if the client fails a claim under the “any occupation” definition. This is vital for someone in Anita’s position, as she is very well trained and obviously qualified to work in many areas of the medical profession apart from her specialty. An “own occupation” definition is essential for her working career and for the ultimate protection portfolio.
Income protection was offered to Anita within her superannuation fund with a three year benefit period. As a young professional of 35 years of age, this is a concern. A claim today would result in her claim finishing by age 38, leaving her without an income after only three years. Additionally, we were also able to identify in the product disclosure statement that the actual disability definition becomes harsher the longer Anita would be on claim.
We recommended to Anita that she have a personally owned income protection policy with a benefit period to age 70. This would effectively provide her with a benefit period of 35 years as opposed to the cover provided under a superannuation fund. It was also important to highlight to Anita that income protection insurance is tax-deductible to her personally if the policy is owned outside of a superannuation environment. Plus, a personal policy has far more auxiliary benefits. Anita’s studies and professional status allow her to take full advantage of insurers blue ribbon policies. Potential offsets to monthly payments at claim time within these contracts are significantly reduced and they provide fantastic inbuilt benefits which are not allowed to be offered within a superannuation environment.
Following our insurance review, it was clearly evident to Anita that while she had cover within her government-sponsored superannuation fund, that insurance was not adequate to meet her needs as a young medical professional.
At FB Wealth Management, we recognise that the achievement of a medical specialty requires major commitment and sacrifice. Illness or injury can deny a young specialist the opportunity to financially capitalise on that effort and it is imperative that any form of insurance provides adequate compensation.