A combined, linked or bundled insurance policy can be a great way to get comprehensive cover at an affordable price. Combined policies allow you to combine life, trauma and TPD insurance (or any combination of those cover types into one policy.
Combined policies can be more affordable than stand alone cover as the benefit paid out by one cover type affects the benefit of another cover type. Please see example in the table below:
|Life Insurance||Trauma Insurance||TPD Insurance|
|Trauma Claim Made and Paid out||($250,000)||($250,000)||($250,000)|
By combining your policies together, you reduce the maximum amount the insurer will have to pay out to you, reducing your premium. You also have the convenience of paying one premium to one insurer.
In recent years, a number of insurers have taken additional steps to making policies easier, more affordable and more flexible for the consumer by introducing Flexible Policy Linking and Split TPD.
Flexible Policy Linking
Flexible Policy Linking allows for multiple cover types to be combined in the one policy but allows the ownership of the policies to be split between self ownership and superannuation ownership.
This allows life insurance to be held within superannuation and for your TPD and Trauma Cover to be held individually by you outside of your superannuation.
This new ownership option is beneficial for two main reasons:
- Take advantage of the cash flow advantages of holding cover inside super without having limitations placed on your TPD cover (Own Occupation TPD will shortly not be available through super while trauma cover is not available through super).
- Allows you to hold Own Occupation TPD which will shortly be unable to be held within Superannuation
- Take advantage of the savings of holding a combined policy without having limitations placed on your TPD cover or trauma cover.
To further enhance your cover and improve flexibility, select insurers have allowed for the splitting of TPD ownership across superannuation and self ownership. This allows you to hold Any Occupation TPD cover within superannuation as well as Own Occupation outside of super.
Splitting your TPD cover has a number of advantages:
- Take advantage of savings of holding a combined policy
- Cash flow advantages of holding cover within super
- Access to both Any Occupation and Own Occupation TPD benefits
- Generally able to claim a tax deduction on TPD premiums for cover held within super
What happens at claim time?
If a TPD claim is made, the insurer will in most cases assess the claim using the Any Occupation definition – that is that you are totally and permanent disabled to such an extent that you are unable to work in any occupation for which you are either trained in, have experience in or have received education in. If this claim is successful, the benefit will be paid into your super fund where it will have to meet a condition of release according to the Superannuation Industry Supervision (SIS) Act in order for you to receive it.
If you did not meet the Any Occupation TPD definition, the insurer will then generally assess you under the Own Occupation definition. In this case if the claim is successful, the benefit would be paid to you directly as the policy is owned individually by you.
Considerations for taking out cover as part of superannuation
There are a number of things you need to consider when deciding to take out insurance in your superannuation:
In order to access a benefit from superannuation, you need to meet a condition of release as stated in SIS.
Details are outlined below:
Generally, life insurance and Any Occupation TPD would meet the definition and the benefit would be released from your super fund to you.
For Own Occupation TPD, the release of funds may be more difficult and they may remain in your super fund until such a condition of release is met i.e. you reaching the age at which you can access the funds inside super. You should think carefully before deciding if this is the most appropriate option for you.
Please note from July 1 2014, Own Occupation TPD will no longer be available through superannuation.