NDIS

This week’s budget revealed that the government will be pushing ahead with the introduction of the National Disability Insurance Scheme.

You might not know what it actually is, but you will more than likely have heard Julia Gillard talking about the NDIS at some point over the last few months.

Given that all Australians will now have free ‘disability insurance’ available to them, does it mean that tradies and other workers no longer need their own income protection or TPD insurance?

That is the question we will now try to answer.

What is the NDIS?

The NDIS – which has now been renamed DisabilityCare Australia – is a government program that will support Australians living with a permanent disability.

According to the official website it will help people who have a “permanent disability that significantly affects their communication, mobility, self-care or self-management.”

Unlike the disability support pension paid by Centrelink which provides an income to people who cannot work due to disability, this new program is more about providing funding for support services.

Is it the same as personal risk insurance?

When we talk about ‘personal risk insurance’ we are talking about covers such as life insurance, TPD insurance, trauma insurance and income protection.

Both life insurance and trauma insurance can be ruled out straight away, as DisabilityCare does not provide any type of benefit due to death (life insurance) or the diagnosis of a critical illness (trauma insurance).

Tradie in Wheelchair

In some ways it is difficult to see how DisabilityCare was ever referred to as an insurance scheme, and that’s probably why the name has been changed.

The reason we say this is because DisabilityCare does not really have any similarities with what we’d normally refer to as insurance.

Both are designed to help people in need, but unlike insurance where you pay a certain premium for a certain level of cover, DisabilityCare is not funded by premiums (it is funded by increased taxes) and there are no set levels of cover.

So it has to be said that DisabilityCare is certainly not the same as, nor does it replace, personal risk insurance.

Do I still need income protection?

A tradesperson should absolutely still have income protection irrespective of the new NDIS / DisabilityCare scheme.

The majority of income protection claims made by manual workers in the building and construction industry do not involve permanent disability.

Most claims are due to musculoskeletal injuries such as broken bones, and unless you break your back and end up in a wheelchair, none of these claims would be picked up by DisabilityCare.

Furthermore, DisabilityCare only provides funding for the services you require. It does not provide an ongoing income in the same way that income protection insurance does.

What about TPD insurance?

Whilst there is no argument that the DisabilityCare is any sort of replacement for income protection, there could be a stronger argument when it comes to TPD insurance.

TPD stands for ‘total and permanent disability’, and straight away that tell us that there could be some overlap between TPD insurance and the NDIS.

But unlike DisabilityCare which provides the same level of support to all Australians, TPD insurance gives you the power to choose how much cover you would like to have.

Furthermore, TPD insurance is paid as a lump sum, and many workers use these funds to repay their mortgage and other debts in order to reduce their financial burden.

Trade Insurance

DisabilityCare does not provide a lump sum amount that can be used in this way.

Another major consideration is the fact that TPD insurance is available with two different definitions, both of which you can read about in our ‘what is TPD insurance‘ guide.

One of these definitions is known as ‘own occupation’. To claim on this policy you must suffer an injury or illness that leaves you unable or unlikely to ever return to your current occupation.

To illustrate how this works we will use the old example of the surgeon. Now we realise that using a surgeon as an example is not too relevant to a tradesman, but it does illustrate the point very well.

So let’s say you were a surgeon earning big dollars, and one day you suffered an injury that resulted in the loss of use of one hand.

Under a TPD insurance policy with an ‘own occupation’ definition you would most likely have a successful claim, as you could not continue to operate as a surgeon with only one hand in action.

But under DisabilityCare things would be very different, remembering that it is designed to help people who have a “permanent disability that significantly affects their communication, mobility, self-care or self-management.”

A person who has lost the use of one hand is certainly not going to fall into that category, and therefore DisabilityCare will be of no use to them.

So to answer the original question, there are some similarities between DisabilityCare and TPD insurance, but it is certainly not a replacement for TPD insurance.

More information

Without a doubt the NDIS is a great thing for the many thousands of people (including many children) and their carers around Australia who suffer from a disability.

It’s great to know that people in need will be looked after and get the support they need, and for the sake of a 0.50% increase in the Medicare levy to help fund the NDIS, it’s hard to argue against it.

It’s also a good thing for tradespeople and other workers around the country who will now have a safety net if things go really bad for them.

But is the scheme a replacement for personal risk insurance such as income protection and TPD insurance? Definitely not.

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