Published 04 Oct 2018
Income protection can be a crucial financial safety net for people who are injured or ill and unable to work. This type of coverage is commonly included as part of your superannuation fund entitlements, although you can also purchase standalone policies.
But why do some people have multiple income protection policies? Is this allowed? And can you make a claim on more than one policy simultaneously?
Understanding income protection policies
You are allowed to have multiple income protection policies, and there are legitimate reasons why people choose more than one product.
For example, you may feel the default income protection provided in your super fund isn't comprehensive enough for your needs. Purchasing an additional standalone policy can help to fill any gaps in your coverage and give you peace of mind.
However, insurers often include offset clauses within income protection policies that prevent claimants from receiving more than a certain percentage of their gross salary while off work.
In other words, you could have three income protection policies that all offer payments equalling 75 per cent of your gross salary, but you wouldn't be able to claim the full amount from all three. You would typically be limited to a combined maximum of 75 per cent across the policies.
Zombie policy scandal strikes Australia
The issue of multiple income protection policies hit the headlines earlier this year when a Productivity Commission report found widespread problems with the way superannuation funds are managed in Australia.
Approximately 17 per cent of the country's workers have multiple super accounts, largely due to people switching jobs throughout their career. One-third of all super accounts nationwide are thought to be duplicates.
This means many Australians have 'zombie' insurance policies, whereby they are paying fees for coverage that is ultimately useless. Income protection is particularly problematic, as employees may be paying multiple premiums but aren't able to claim against more than one policy.
Furthermore, people can't claim income protection while they are unemployed, but funds will still continue to charge members fees and premiums. Zombie income protection policies erode an average worker's retirement pot by $60,000 across their career.
How do I make a claim?
Income protection can provide important financial support for you and your family in times of trouble. Nevertheless, you should choose your policies carefully and check whether you have redundant coverage across duplicate super accounts.
If you are having problems making a claim for income protection, please contact Gerard Malouf & Partners Superannuation Lawyers. We offer a no-win, no-fee service to help you access the benefits to which you are entitled.