DisabilityCare & Insurance (or, don’t cancel your life policies just yet!)

DisabilityCare & Insurance (or, don’t cancel your life policies just yet!)

DisabilityCare (or the former National Disability Insurance Scheme) will be of great benefit to Australians living with a long term disability who now have access to a personalised support plan & the necessary funding provided. However there is some confusion about what the scheme is and is not, and how it works in conjunction with other existing benefits.

The program is aimed at those Australians most at need who are born with, or who later acquire a permanent disability, significantly affecting their quality of life, such as self-care, mobility and communication. Long term, high quality support may be provided through a personal support plan and the necessary funding.

But whatever you do, don’t go rushing out and cancelling your personal insurances – DisabilityCare does not cover day-to-day living expenses nor is it an income replacement scheme. Funding decisions for DisabilityCare will also be based on what families, carers and the community can provide that person i.e. a well supported person will have less funding allocated than someone without that support.

So while DisabilityCare may assist should something unexpected happen to you, you should not expect this to be sufficient for your current quality of life.

Income protection insurance will still be as important as ever – this will replace your income (up to 84% of your previous salary) while you are unable to work, so you can still pay for your rent, food and kids clothing.

Your lump sum payments (life, total & permanent disablement, and trauma covers) are still essential for the non-medical expenses you will incur – paying off debt, granting your partner time away from work, funding your children’s education.

The median level of disability cover held by Australians represents just 15% of a family’s needs (RiceWarner Dec 2013) proves that you still need to assess your cover needs, which are likely to be more than your super fund is automatically giving you and not presume that WorkCover and DisabilityCare will make up the financial difference.

My tips on reviewing your personal insurances:

- How much are you insuring – is your life insurance just the default amount your super fund is providing you? At a minimum, is this enough to cover your mortgage?

- What are you insuring – are you insuring your car and not your income? No income, no car!!

– Why are you insuring – premiums will increase with your age so do you have a long term plan in place to ensure you can afford to keep your cover at a time when you are most likely to claim?

- When did you take insurance – Did you take out your policy years ago? Is it still comprehensively covering you in regards to cover amount and policy benefits?

- Who are you insuring – you may be covered but it is just as important to cover your partner. If something happens to you, how will you fund the previously-shared living expenses?

- Where is your insurance held – life insurance in super won’t be a burden on your cash flow and income protection personally owned is deductible to you.

So for the new financial year, take some time to consider the what if scenarios and protect yourself against financial horror stories.

 

By Kathryn Fitch

Leapfrog Women & Money

Financial Adviser