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In group life policies sometimes the ‘unlikely to work’ definition applies and sometimes it doesn’t. This blog highlights when the more onerous ‘activities of daily living’ definition may apply.

Which TPD definition applies to me?

Group life policies of insurance, offered through membership of superannuation funds, usually offer death and disablement cover. Such insurance cover allows a member to make a claim against the policy for total and permanent disablement, assuming the policy conditions are met.

Previously, we have looked at the “unlikely to work” total and permanent disablement definition. Typically, this TPD definition requires that you have ceased work due to an injury or illness for at least six consecutive months, and as at the date of disablement, are unlikely ever to return to any gainful employment for which you are reasonably suited by education, training or experience.

Sometimes, however, a more difficult definition to satisfy will apply to the assessment of a TPD claim.

It is important to be aware of the circumstances when this may occur.

In situations where a worker is injured, it is not unusual for working hours to be reduced. Ultimately, due to the injury, the worker may be forced to cease work altogether.

If the hours worked are reduced to less than an average of 15 hours for the 12 months prior to the cessation of work, the applicable TPD definition may shift to the more onerous activities of daily living (“ADL”) definition.

This means the applicant will have to show s/he is totally and irreversibly unable to perform at least 2 of the ADL’s, such as feeding and dressing oneself, without the assistance of another adult or appropriate aids. Many workers who satisfy the ‘unlikely to work’ definition will not meet the ADL definition.

Of course, one must be guided by medical advice in making decisions about returning to work. However, it is important to know such decisions may impact on a future TPD claim.

Other circumstances where the change in applicable definition may occur are:

  1. When you cease employment with a specific employer.

The recent Victorian Supreme Court of Appeal decision in MLC Nominees Pty Ltd-v- Daffy [2017] VSCA 110 addressed the effect of termination of employment on the applicable TPD benefit and held that despite Mr Daffy’s injury occurring prior to the cessation of employment, the ADL definition applied.

Of course this decision was specific to the applicable MLC policy but it is instructive in respect of the Court’s approach to the interpretation of insurance contracts, and the huge impact a change in circumstances may have on an individual. In Daffy the sum insured was in excess of $1.5m.

  1. If your employment status is that of a casual worker, irrespective of your hours worked;
  2. You are over the age 60;
  3. Not gainfully employed; and
  4. If you work in what is regarded by the policy of insurance as a hazardous occupation. This can be very broad and include process workers, labourers and those working in highly repetitive jobs.

Take away lesson:

Always check your insurance policy so that you are aware of its terms.
Having done so, you may then make an informed decision regarding continuing to opt in to paying premiums for the group life policy or whether it is in your best interests to seek advice regarding alternate disability insurance.

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