It’s a rare event to have a bill introduced into parliament by a tearful Prime Minister, but the DisabilityCare Australia 2013 bill – which will help pay for the national disability insurance scheme by raising the medicare levy from 1.5 to 2 per cent – had such an auspicious beginning.
Watched by disability advocates in the public gallery, Julia Gillard said the Medicare levy increase, which is supported by the opposition, was proof that politics could solve complex problems.
DisabilityCare Australia, which began on July 1, is intended to assist the most severely disabled by ensuring that they and their carers get appropriate support, services, training and equipment to deal with the severity of the disability of the individual.
This allows individuals to customise the services provided to them, rather than have a one-size-fits-all system. While this type of support is long overdue, there are still situations that require attention.
Additional income is not provided to people who are suffering from disabilities and to survive, these people will need to rely on Centrelink payments such as Disability Support Pension and/or a Carer’s Allowance. These benefits provide an income of less than $20,000 per year.
This highlights the need for other forms of income to be provided for individuals suffering from a disability.
In the event that a person suffers a disability, they still need to put a roof over their head, clothes on their back and food in their stomachs. This necessitates the need for a good income protection policy or a total and permanent disability (TPD) policy for an individual to maintain their standard of living after the disability occurs.
An income protection policy provides a regular and consistent monthly income, while TPD is normally used to reduce or extinguish debts such as the mortgage on the family home or a car loan.
DisabilityCare Australia, used in conjunction with appropriate insurance, will provide a higher level of support than what has currently been available. It will ensure the individual who suffers a disability will receive appropriate medical treatment and services to assist in the treatment and/or rehabilitation coping with the disability. It will give the individual some comfort in the knowledge they have the financial security of a regular income or alternatively may be able to reduce or extinguish a debt such as a home mortgage or car loan, depending on their insurance policy.
While some members of super funds may now believe that life insurance is unnecessary with DisabilityCare Australia now in place, that is far from the truth.
Life insurance within and outside of super is essential to ensure that a member maintains a standard of living, even after suffering from a disability.
John Brogden, chief executive of the Financial Services Council, recently authored an opinion piece in The Australian (May 3, 2013) applauding the new scheme, but sounding a warning for the country’s underinsurance problem.
In it he writes: “Australians already chronically underinsure their lives. The fact that DisabilityCare will be funded through a levy which appears in tax returns heightens the risk that individuals will see themselves as covered for accidents that affect their income. This is not the case.”
As an industry, we need to ensure super fund members and the Australian population in general understand the intent of the scheme through education. Income protection and disability insurance, and in the retail advice space – trauma – will continue to play an important role in helping Australians protect and plan for a secure future.