Caught short by switch in income protection cover
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Caught short by switch in income protection cover

Hi Nicole,
I paid for income protection through my super for 11 years but three to four months before I became permanently unable to work and made a claim for income protection, the insurance company NGS altered the length of time of the cover. Instead of being eligible for payment until the age of 65, the cover was decreased to five years. We were not forewarned of this change nor given a choice. I am into my fourth year of payment and this payment will cease next year. This will be a major financial disadvantage to me. Is there anything I can do? I am desperate for your help in this matter.
Sincerely, Anne

Oh Anne, my heart goes out to you. I hate to say it, but I have never been a huge fan of income protection insurance in super … not only do premiums erode your balance but it is "underwritten on a group basis", which means without regard to your own circumstances.

You're meant to be notified if the terms and conditions of your insurance change. Illustration: Simon Letch

You're meant to be notified if the terms and conditions of your insurance change. Illustration: Simon LetchCredit:

As long-time insurance adviser Michael d’Apice, of Polaris Financial Solutions, comments: "These and other types of problems happen all too often.

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"Because the life insured is not a party to the contract of insurance, they do not have the same level of control as … with personally owned insurance."

It was only this decade that income protection policies within super became able to pay out until age 65 (there was previously a shorter two-year time limit). Unfortunately – almost definitely to contain premium costs for members – yours stopped doing so in July 2014.

Backing up, NGS is not actually your insurer but your super fund – an industry super fund for school, aged care and community workers. At the time of your accident or illness, Anne, it was out-sourcing the insurance within its fund to CommInsure.

It is from here that your payments come … at least for another year or so.

A spokesman for NGS says: "We are very sorry to hear of Anne’s distressing situation. We encourage our members to speak with us in the first instance if they have any questions or concerns."

That’s preferable to negative media attention, for sure!

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It was the responsibility of NGS, as your fund, to inform you of the "significant policy changes" in 2014, which the spokesman says it did via a letter.

The keys are:

  1. Whether this is, in fact, the case
  2. Whether the letter made the age-65-to-five-year payment reduction clear
  3. Whether it was sent before the date you stopped work.

Specialist insurance lawyer John Berrill, of Berrill & Watson, says: "They have to notify members of any changes and you are often (but not always) given the opportunity to change your insurance cover at that time.

"If that didn’t happen, you might have a compensation claim."

Anne, I assume you have investigated any total and permanent disability cover you had within your fund as well? While not all policies payout both a TPD and income protection claim, as of July 2014, NGS’s could.

A lump sum would "compensate" you – to a degree.

Write to Nicole with a consumer finance question or problem at nicolehelps@fairfaxmedia.com.au

Financial educator, commentator and author, as well as a qualified financial adviser and stockbroker.

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