Superannuation for people with a Terminal Illness

Introduction

Many people who have been diagnosed with secondary or advanced cancer need to stop work, either permanently or for a period of time. Sometimes people stop work to allow for treatment and other times it is because they can no longer cope with full-time work. If someone stops work because of an illness they are often entitled to be paid insurance benefits through their superannuation funds. Also, if someone has been diagnosed with a terminal illness they can access their superannuation account balance even though they are under the preservation age (up to 60).

Tax free super

With effect from 1 July 2007, people with terminal medical conditions can access all their superannuation tax free, regardless of their age or whether they are still working.
The change means that people who are diagnosed as having less than twelve months to live can get immediate access to their superannuation to relieve financial stress without having to stop work and without losing a large slice of the payment in tax.

If your doctor has agreed to sign the form indicating you have less than 12 months to live, and you in fact live for a longer period of time, you do not have to pay the insured benefit back to the superannuation fund.  
It is important to note that not all funds are the same.  It is worth while to take the time to speak to an expert to inquire about the best way to access the funds from your superannuation company.

Extra insurance benefits

Most (but not all) super funds also include extra benefits for death and disability.  They are usually insurance benefits which are paid on top of your account balance in the superannuation fund.

The disability benefits might be large lump sums or a monthly pension.  The death benefits are usually lump sums which can be large six-figure amounts.  Some super funds also include terminal illness insurance benefits which are usually the payment of the insured death benefit if you are diagnosed with a terminal illness.

Insurance benefits are funded by insurance premiums deducted from superannuation contributions or from the account balance.  It is possible to have multiple disability or death claims. Many people have a number of different superannuation accounts and it is possible in many cases to have a claim on more than one of the policies even if you have not paid any contributions in to the fund for years.  

Warning!

Whilst the changes to the superannuation laws are welcome, early access to super can mean losing very valuable death and disability insurance benefits.

If you take all or most of your super account balance, you will usually lose your insurance cover for death and disability benefits.

You must be very careful before deciding to access your super if you have a terminal illness.  You may need to keep some money in your super fund or take up an insurance continuation option to keep the insurance cover going so that if you get too sick to work, or die, insurance benefits can still be claimed.

If you take out your super when you are still working you may lose valuable insurance. If you have a pre-existing illness, you may then find it hard to obtain any new insurance cover.
If you are paid a TPD lump sum, you may lose your death insurance cover, even if it is worth more.

How to claim

To claim a Total & Permanent Disability (TPD) benefit from a superannuation fund, the fund will need to complete a form and so will your doctor. The superannuation fund may also require you to see one or two of their doctors.
To be successful in a TPD claim, you usually have to show that you are not able to do your job or a different job that is within your education, training and experience.

If your illness means that you have to stop work, you should get advice immediately before making any decisions.
To claim a Terminal Illness benefit you will need to get medical certificates from two doctors, one of which must be a specialist, stating that you suffer from an illness or injury that is likely to result in death within twelve months.
You then contact your super fund to apply for the pay-out and send in the medical certificates.  You may have to fill in an application form.

The super fund should make a decision quickly.  If no decision is made within approximately one month or if the claim is rejected, you can lodge a complaint.   

Free superannuation and insurance advice service
It is really important to get advice about the death and disability benefits in your super funds before you access your superannuation.

Call Maurice Blackburn on 1800 196 050 for free legal advice.