Can you claim insurance twice or more?

Discussion in 'Accounting & Tax' started by MyDarlinghurst, 1st Feb, 2018.

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  1. MyDarlinghurst

    MyDarlinghurst Well-Known Member

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    just say I had 2 or 3 Superanuation accounts and decided to take out TPD total disability insurance on all of them.

    so if ever the time comes and i need to claim can i legally claim on all 3 or just one?

    im thinking its a waste of money to pay all 3 if legally I can only claim one insurance.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    What does the policy say?
     
  3. Scott No Mates

    Scott No Mates Well-Known Member

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    Life insurers may pay but income protection or TPD will each pay % and not double up.
     
  4. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Saw a client in this position and the insurer considered a fraud could have been involved and it massively delayed actions (the insured had no idea of the problem or that there were two polices. The insurer detected it). Both policies refused to pay. Only after investigation and they confirmed the employer had incorrectly maintained paying a old policy plus a new one.

    Then the agreed the old policy should have been cancelled and then paid the newer policy. Otherwise it would have been apportioned with a possible decrease in benefits.

    May be a sign of the need to obtain financial advice (AFSL licensee) who knows these and many other issues.
     
  5. Ross Forrester

    Ross Forrester Perth business advisor and founder Business Member

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    Why do you have three super funds? Looks like you are paying three sets of fees.
     
  6. MyDarlinghurst

    MyDarlinghurst Well-Known Member

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    Thanks Paul....interesting.

    I guess those of us who have Income protection insurance say with a bank and also with their Superfund should be aware .
     
  7. dabbler

    dabbler Well-Known Member

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    lol.....classic......

    best answer is........ "*you*....can", seems you broadcast that you intend too.
     
  8. Beelzebub

    Beelzebub Well-Known Member

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    Are you not able to pay a higher premium for a higher insured amount?
     
  9. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    nope...................

    think of the fraud context

    ta
    rolf
     
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  10. Propagate

    Propagate Well-Known Member

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    So, in my case I have a lump of death cover in my Super and I've topped it up with another lump sum outside of my super. Will that give my beneficiary grief should they need to claim? I just figured two separate polices, two premiums and premiums based on sums insured so what's the drama?

    Maybe I should contact my super and try and increase that one to the whole amount, then cancel the secondary policy that's outside of Super?
     
  11. Marg4000

    Marg4000 Well-Known Member

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    Death cover is different. You can have one policy or as many as you want. The total amount is discretionary and entirely up to you. What you have done is entirely legal and not unusual.

    Income protection is different as your income is a definite amount, and you can only insure up to a percentage of it. A bit like your house, you can’t insure it with two separate companies, have it burned down and claim from each to receive double its value. In both of these cases, if you did have more than one policy, in the event of a claim you would have to declare the fact that there were multiple policies. And put up with the internal wrangling, and probably lengthy delays, that would ensue to decide who paid what.
    Marg
     
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  12. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Income can only be insured to 75% of actual lost earnings. A claim triggers review of earnings etc. If you are unemployed they will pay $0. The cause of why income is not being earned must be a defined event. If you die they will pay $0. If you dont meet definitions in the specific policy they may pay $0. There may be wait periods. There may be a period of payment - some cheap policies are 6 months and others are life. The policy will have a benefit clause that reduces a benefit for any other source of recover (ie another policy)., Benefits are taxable. Some benefits include other things like they will pay a 9.5% super contribution etc. Definitions around any / same occupation may exist. Group insurance through many super funds has rules surrounding limits and tough medicals can be expected for enhanced cover anyway.

    Life insurance is slightly different. You die and its covered then they pay the defined sum PLUS your super balance. If outside super then they pay the defined sum insured to estate or nominated beneficiary often at their discretion. You can have multiple policies and increase sum insured but most insurers will have limits and cost also affects insured sums based on age and health.

    Insurance should be considered for self, spouse and also your estate planning. No point insuring a large sum to benefit kids and it goes to your widow who meets Mr New and kids never see a cent. Financial + legal advice part of the process.
     
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  13. qak

    qak Well-Known Member

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    Just be aware that death cover, TPD & income protection are all life insurance policies.

    What you can do with IP is have two policies that would not pay concurrently - have one pay for a short term after a wait period, then one pay for life after the first policy finishes. So you might have:
    Day 1: Fall sick
    Days 1-60: wait period policy 1 (self insured by accrued sick leave or own resources)
    Day 61-2 years: cover provided by policy 1 for a 2 year maximum period only
    Then Policy 2 which has a wait period of 2 years might start paying.

    You would really want to talk to an insurance specialist to implement this kind of strategy, taking into account your own situation.

    The other issue with insurance policies is how much tax may be payable depending on the whether they are inside or outside of super, your age at date of payment, who is the recipient etc.
     
  14. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Income protection and TPD are NOT life insurance. You must be alive to claim them !!
     
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  15. qak

    qak Well-Known Member

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    No, you are referring to life (or death) cover.

    From ASIC:

    Types of life insurance
    There are different types of cover that fall under the broad heading of life insurance. Depending on your circumstances you may need one or more of the following:
    • Life cover - also known as 'term life insurance' or 'death cover', pays a set amount of money when you die. The money will go to the people you nominate as beneficiaries on your policy.
    • Total and permanent disability (TPD) cover - pays a lump sum to assist with rehabilitation and living costs if you are totally and permanently disabled. TPD is often bundled with life cover.
    • Trauma cover - provides cover if you are diagnosed with a specified illness or injury. These policies include the major illnesses or injuries that will make a significant impact on your life, such as cancer or a stroke. It is sometimes called 'critical illness cover' or 'recovery insurance'.
    • Income protection - replaces the income lost through your inability to work due to injury or sickness.
    Source: Life insurance | ASIC's MoneySmart
     
  16. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    TPD, Trauma and IP insurance arent life cover. They are forms of income replacement insurance for a person who incurs a event that means they need financial support for which they are insured but havent died. They may be stand alone or bundled WITH LIFE COVER which covers the alternate = death....(Quote ASIC.)

    Dont take ASIC so literally. If a financial adviser said that their advice would be defective (and may be sued) as it falsely misrepresents that TPD, Trauma and IP insurance can be claimed at the time of loss of life. Instead only the death cover would be paid.

    Typically life insurers (a generic term for firms who hold specific ALS licenses from ASIC to market , underwrite and sell insurances) sell these products but they can also be sold as a financial product by licensed brokers and advisers (sometimes white labelled eg Kogan Insurance). ASIC refers to the product issuer as life insurers to categorise them differently to general insurers (ie home, car etc) and workers comp insurers, health insuers etc who issue products under other state/Commonwwealth laws. The financial product is never called life insurance unless it covers death.

    Small differences but important.
     
  17. devank

    devank Well-Known Member

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    I was thinking similarly. From mememory, the IP (income protection) via super had about 2 years wait. I was thinking of getting another IP outside super to cover that two year wait period.
     
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  18. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    IP insurance in super has some limits. A condition of release must also be met and as you said - Often group policies have longer waits. You could enquire about reduction. The typical strategy is IP outside super. The premiums are tax deductible and no condition of release.

    Life cover in super can be more functional (as death is a COR) AND the fund can claim a deduction (albeit 15% tax rate) but when in own name no deduction. Life cover can be fairly cheap in super too. And often easy to acess with a new job etc at default levels although MySuper changes have some limits