DisabilityCare Australia: Do you still need to consider life insurance?

What is DisabilityCare?

Also known as National Disability Insurance Scheme (NDIS), DisabilityCare is an initiative by the Australian Government to provide nationwide support and services for people with disability that require long-term care and assistance. This scheme was proposed by the Prime Minister in the Productivity Commission Report on Disability Care and Support in August 10, 2011, following similar arrangements to that of Medicare.

With DisabilityCare, the Government is committed and focused on improving the quality of life of many Australians with significant and ongoing disability, including their families and carers, by ensuring equal access to high quality support and services. The implementation of DisabilityCare across Australia is crucial to enable people that are affected by disability to fully participate in the social, economic and cultural aspects of society - something that has not yet been made possible due to the barriers that are still present today and the current disability welfare system.

Source: NDIS, 2013; Productivity Commission Report on Disability Care and Support, 2011

With DisabilityCare, will there be any need for Life Insurance?

DisabilityCare Australia provides cover only for the basic costs of care and support that are required by individuals who are disabled since birth or as a result of an accident or injury. It does not cover day-to-day living expenses nor does it provide a replacement for income for those who are no longer able to work.

Many Australians are already severely underinsured and the implementation of DisabilityCare may lead people to believe that it alone will provide adequate cover from accident, while this is not the case.

DisabilityCare won't cover:

  • Day to day costs
  • Income replacement
  • Short term disabilities

On the other hand, life insurance policies are designed to provide coverage for specific needs and events, such as death, serious illness or injury, permanent disability and loss of income. In the event of a claim, the policyholder or the nominated beneficiaries will receive a lump sum or monthly benefit that can be used to cover any daily living expenses, rent or mortgage repayments, and pay off any outstanding debts. This is not something that DisabilityCare provides and since it will be implemented as a Medicare-type system, it should be considered as the most basic form of protection and it does not cover more complex needs of individuals and/or their families.

Source: The Australian (John Brogden), 2013

What about Australia's Current Disability Support System?

For many years, disability support in Australia has been managed by each of the states. Due to poor funding and significant discrepancies between the states, access to a care package is often very limited and marred by long delays. Eligibility to receive the package is further complicated by different criteria set by each state around how the disability was acquired.

With a high rate of unemployment and need for income support among people with disability, a care package can bring great improvement to disabled populations standard of life. It can help to increase economic and social participation of 410,000 Australians with severe disability, thus boosting the productivity level. However, with no national scheme in place and nationwide disparity on the current disability support system, it came to no surprise that Australia has the lowest employment participation rates in the Organisation for Economic Co-operation and Development (OECD) for people with disability. As a result, around 45% of Australian households that have a family member with a disability are living in or below the poverty line, while the OECD average is at 22%.

Source: The Monthly, 2010; Bigpond Money, 2012; Sydney Morning Herald (John Della Bosca), 2013

Why is it Important for Australia to have a National Disability Scheme?

With DisabilityCare, people suffering from disability will not only get access to improved long-term care and services, but also tailored support to meet their individual needs. DisabilityCare can also reduce the physical, emotional and financial burden that families and carers often experience from being primarily responsible for people with disability, which in turn can help to reduce the probability rate on the occurrence of mental illness.

With an outlook to the future and a focus on long-term outcomes, early intervention and adequate support provisions are at the core of DisabilityCare, with a long term investment to improve an individual's capacity and ability to be independent rather than welfare. This scheme will also benefit all other Australians, as disability can affect anyone, often at unexpected times.

Source: NDS, 2013

What types of support would DisabilityCare provide?

The support that DisabilityCare provides will be tailored accordingly to the individual's disability and needs and these may include (but not limited to):

  • Aids and appliances, which include artificial limbs and communication aids
  • Home and vehicle modifications, to cater for the disability
  • Personal care, to help the individual with disability take care of themselves in their own home, which may include the following activities:
  • Showering, bathing, dressing, grooming, toileting and personal hygiene,
  • Eating and/or drinking,
  • Mobility and transfers,
  • Regular maintenance of health, which include oral hygiene, use of medication and routine exercises,
  • Nursing care, for individuals who require additional level of care and support, such as those who are quadriplegic and on a ventilator.
  • Support for community access, to allow personal enjoyment, social interaction and leisure
  • Respite, to provide people with disability, their primary carers and families with a short break and/or holiday programs
  • Specialist accommodation support, such as group homes and alternative family placement
  • Domestic assistance, to provide support for people with disability to have the freedom to live on their own in the community and complete tasks such as preparing a meal, banking, shopping, doing certain activities and attending appointments
  • Transport assistance, to coordinate individual or group needs to commute
  • Employment assistance and support for transition to work, to help people find and prepare for work
  • Therapies, such as counselling and physiotherapy
  • Emergency support, in the event of a family member or carer's death with organising emergency accommodation and respite services
  • Guide dogs, which may include the costs of the dog, training and veterinary services

Source: Productivity Commission Report on Disability Care and Support, 2011

When will DisabilityCare be accessible by all Australians?

The Government has put aside $1 billion over the next four years to fund the trial phase of the DisabilityCare program that is set to launch in July 2013. The trial will be accessible to 20,000 people with significant disability that live in specific areas of South Australia, Tasmania, the Hunter region of NSW, the Barwon region of Victoria and the ACT (starting in July 2014).

This initial phase of DisabilityCare implementation is particularly important to assess whether it has been put into effect in a way that has been advised and if there are any areas for improvement. This way, the DisabilityCare system can be built and developed further to become more sustainable in the long run.

While there has been much a debate on how the Government can afford to pay for the DisabilityCare scheme, which may cost between $15-$22 billion per year when it is fully operational, all major Australian parties have given the go-ahead for the scheme to be fully implemented.

In the 2013 federal budget, Treasurer Wayne Swan has announced an investment of $14.3 billion over seven years to fund DisabilityCare and shown his support for the Prime Minister's bid to increase the Medicare levy from 1.5% to 2%, in order to raise up to $3.3 billion a year, which will take place starting from July 1, 2014.

The Government is committed to complete the full rollout of DisabilityCare across all states by July 2019, providing support for 460,000 Australians that are affected by a significant and permanent disability. While an agreement has yet to be reached with Western Australia at the time of this publication, the Government will continue to sought discussion with the state for inclusion in the scheme.

Source: Parliament of Australia (Luke Buckmaster), 2012; NDIS, 2013; News.com.au (Phillip Hudson et al), 2013; Financial Review (Phillip Coorey), 2013; ABC News (Samantha Hawley), 2013

Different types of protective life insurance to consider

Life Cover

Life Cover provides a lump sum payment to your financial dependents should you pass away or have been diagnosed as terminally ill with less than 12 months to live. Life Cover can be bundled with Total and Permanent Disability (TPD) Cover and/or Trauma Cover for additional protection in the event of a permanent disability and/or serious illness or injury.

Your nominated beneficiaries can use the death benefit payout to meet any financial obligations that they still have. The lump sum payment is often used to cover any immediate expenses upon death, such as funeral expenses, legal fees and estate settlement fees; settle any outstanding debts, such as mortgage or loans; and pay for the children's education expenses.

DisabilityCare provides care and support for individuals with significant disability while they are still alive, with a long-term focus to assist them in living independently within the economic and social context of their community. DisabilityCare also aims to minimise the financial and emotional burden that are often placed on families as the primary carer of family members affected by disability.

Life cover, on the other hand, alleviates the financial difficulty that may arise, as a result of death or terminal illness of the household's main income earner. The dependents will benefit from this type of insurance as they will have to assume the responsibility in meeting any current or future financial obligations that the family has, even if the main income earner has passed away. It allows the partner/spouse to make necessary adjustments without having to worry about the family's finances.

Learn more about Life Cover

Total and Permanent Disability (TPD) Insurance

TPD insurance is a type of living insurance that provides coverage for a total and permanent disability as a result of a serious illness or injury that has rendered your ability to ever work again. A lump sum benefit is payable to you, as the policyholder, which can be used in any way you see fit.

TPD benefit can be utilised to cover any medical and hospital cost, rehabilitation expenses, and nursing care. It can also be used to pay for your vehicle and/or home modification cost that are required to cater to your condition.

Total and permanent disability (TPD) insurance is similar to DisabilityCare in nature; however, there are few notable differences between the two types of cover.

DisabilityCare focuses on the availability of high quality care and assistance required and needed by people with disability, but it does not cover everyday expenses, such as health, shelter or transport, and only provides referrals for such services. TPD insurance does only provide cover for a permanent disability caused by an accident, but also serious illness that have rendered your ability to ever again. With TPD benefit, you are able to meet all of your everyday living expenses, pay for medical expenses, seek the best rehabilitation and treatments available and make any necessary adjustments to your home and vehicle, so that you can live independently and comfortably with your condition.

Learn more about tpd insurance

Trauma Insurance

Trauma insurance is another type of living cover that provides financial protection should you be affected by one of the trauma events specified in your policy. Some of the common medical events that are covered by trauma insurance include (but not limited to):

  • Cancer
  • Heart attack
  • Stroke
  • Open heart surgery
  • Blindness
  • Deafness
  • Loss of speech
  • Loss of limbs
  • Loss of independent existence
  • Quadriplegia

The lump sum benefit from trauma cover can be used to cover any medical, hospital, rehabilitation and treatment costs, as well as to keep on top of any other financial commitments you may have. Trauma insurance does not only cover you against life-threatening illnesses, but also serious injuries that may have caused your permanent disability.

Trauma insurance is a beneficial form of protection against debilitating illness and injury, which is quite similar in nature to TPD cover. The difference is, trauma benefit is payable upon the diagnosis of a medical event that is listed in the policy, regardless of whether or not you will return to work. This means, you can focus on finding the best medical treatment available, without having to worry on how much it will all cost. This is something that DisabilityCare cannot provide.

Learn more about trauma (critical illness) insurance

Income Protection Insurance

Income protection provides a replacement of your income should you be temporarily disabled as a result of an illness or injury. You can receive monthly benefit payments of up 75% of your average income to cover your daily living expenses while you are still recovering from your illness or injury.

With income protection, you will be financially protected should you be temporarily disabled due to a debilitating illness or injury. It covers your ability to earn an income, which means you can benefit from the monthly payouts to replace your lost earning because of the time off work. You won't have to worry about keeping on top of your daily living costs when your sick leave runs out and you can focus on your recovery back into full health.

DisabilityCare, as previously mentioned, only provides much needed support for individuals with significant and ongoing disability. This means, you may be required to meet specific criteria of a significant disability at the time of assessment to be eligible. DisabilityCare does not replace any lost income as a result of your disability nor does it cover your daily living expenses.

Learn more about Income protection insurance

Disability care: Not a replacement for life insurance

DisabilityCare is an important and significant milestone for Australia in creating a national disability support scheme that is fair and accessible to all Australians. It is a major step forward to ensure all Australians with disability are able to fully participate in every economic, social and cultural aspect of life. However, DisabilityCare is not to be mistaken as a replacement for life insurance, as they serve two very different purposes. Different types of life insurance should be considered as valuable forms of protection with one very important purpose - to provide financial aid for you and your loved ones should anything should ever happen to you.

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Maurice Thach

An insurance-savvy writer for finder.com.au who loves finding an answer to the question "Am I covered for ________?"

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