Many people have access to TPD cover through their superannuation policy, although others may choose a standalone product from an insurer if they have tailored needs. Payouts are used to cover past and future income losses, medical bills, care and rehabilitation needs, out-of-pocket expenses and other costs.
However, policyholders must meet certain criteria to receive payments, which means there is always a chance the insurer or super fund refuses to approve the claim. But how often does this happen in Australia?
TPD claims rejected more than any other life insurance
In 2016, a comprehensive ASIC report into the life insurance industry examined the decline rates of four types of cover:
- Life (cover for death).
- TPD.
- Trauma.
- Income Protection.
Overall, nine out of 10 life insurance claims are paid in the first instance, but the figures for TPD cover were less encouraging.
In fact, disability insurance was the least likely of the four products to result in compensation, with 16 per cent of claims rejected. Some insurers had particularly high decline rates; ASIC found three companies turned down 37, 25 and 24 per cent of claims, respectively.
Fewer than half of funds make full or partial payments on between 71 and 90 per cent of claims, according to SuperRatings. The research, published in the Australian Financial Review, also showed nearly one in ten successful policyholders receives less than 60 per cent of the amount claimed.