If illness or a disability is keeping you from working, you’ll need money from another source. Depending on your circumstances, you could have access to government allowances, work-related payments or even an insurance payout.
Some of the pathways are quite complex, so if you’re feeling overwhelmed, don’t hesitate to ask for help. Having a family member or friend go through the options with you can make the process less stressful. And for answers to the bigger questions, consider talking to a professional financial adviser. In the meantime, this guide is a practical place to start.
Whether you purchase risk insurance through a specialist provider or are covered by insurance from your superannuation fund, having insurance in case something unexpected occurs can give you great peace of mind.
Risk insurance
Three types of insurance can deliver cash or an income when you’re unable to work:
If you hold a policy of this kind and become ill or disabled, you can make a claim by contacting the insurance company directly, or your broker or financial adviser if they arranged the policy for you.
You’ll need to provide the policy number and supporting information such as medical reports and test results, details of your duties at work and evidence of your income.
Your insurer may want to contact your doctor directly, but they must ask your permission first. They might also arrange for you to be examined by an independent specialist who will send them a report.
Superannuation
If you have superannuation, your policy could well include some form of disability insurance.
“Most super funds automatically offer a default level of Total and Permanent Disability and Income Protection insurance cover” says Jodie Howes, a Senior Financial Adviser. “You can contact your super fund to find out what insurance cover you have.”
From 1 April 2020, new legislation does not allow super funds to offer insurance automatically to new members for the following types of accounts:
Existing members with low-balance accounts, below $6,000, must opt-in to retain default cover.
“Claims can take time to process and there may be a qualifying period. If you are able to make a claim you should do that as soon as you know you’re unable to work.” says Jodie
The benefits of a default super policy
Insurances inside super are often arranged by default when you’re first employed.
“That means you don’t have to have a medical examination or answer questions about your health,” says Jodie. “As long as you continue to make super contributions, your cover will stay in place even if your health declines.”
However, if for any reason, you don’t make contributions for 16 months or longer, insurances within the policy will be cancelled unless you "opt-in" to retain your insurance.
“If you then apply for this kind of cover outside of super, your age or pre-existing health conditions will be taken into account,” says Jodie. “Depending on the circumstances, your premiums could be much higher, or the insurer might even refuse your application.”
Making the most of your payout
If your insurance pays out a substantial lump sum, your first priority will be to cover any medical or rehabilitation expenses, plus the cost of modifying your home if you need to. You can then use it to pay off debts such as your mortgage, personal loans and credit cards.
Any leftover money could be invested with the aim of creating an income stream to ease the financial strain of an illness or disability. Again, a financial adviser can help with this.
As long as you’re not working on a casual basis you should be entitled to a certain amount of paid sick leave. Your employer will want to see reasonable evidence of your inability to work, such as a medical certificate.
Once your paid sick leave has been used up, your employer might agree to a period of unpaid leave. You could also consider using your holiday entitlements to cover time off for illness or disability.
“Occasionally, an employer won’t be very cooperative,” says Jodie. “If you run into problems that can’t be resolved through reasonable discussion, you can contact the Fair Work Ombudsman for help and advice.”
If your illness or disability is due to something that happened at work, you could be eligible for workers compensation.
This is a form of compulsory insurance taken out by employers to protect themselves and their employees. It can cover your wages while you’re unable to work, as well as any medical expenses and rehabilitation.
Workers compensation is governed by individual states and territories. There are details on the Fair Work Ombudsman website.
Depending on your circumstances, the government may be able to provide a range of payments. For example, you might be eligible for a Disability Support Pension, the JobSeeker income support payment, or a Mobility Allowance to help you cover the cost of travel associated with work, study or looking for work.
The Payment and Service Finder on the Services Australia website can guide you to those that may apply to your situation.
Some people have time to plan for when they’ll no longer be able to work. For others, a life-changing accident or illness comes out of the blue. Either way, rethinking your finances can be daunting.
“It’s important to remember that help is always available, whether that’s from a professional adviser, Centrelink or government websites such as Moneysmart,” says Jodie. “There are also many online communities offering support from people in similar situations, so you don’t have to do it alone.”
If illness or a disability prevents you from working, remember help is at always at hand. Seek out a financial adviser who can help you make plans now, so you can focus on your future.
