Ancillary benefit(s)

Supplementary benefits that accompany a group policy. Examples of common ancillary benefits included in group policies are trauma benefit, nursing care benefit, specific injury benefit and family care benefit.

Automatic Acceptance Level (AALs)

The automatic acceptance level is the maximum amount of cover that an insurer will provide without underwriting. (Life-insurance underwriting involves insurers assessing the risk of insuring a potential policyholder based on their age, health, lifestyle, occupation, family medical history, hobbies, and other factors as determined by the underwriter.) Where cover is in excess of the AAL or is voluntary cover, an insurer will ask for evidence of health.

Benefit design

Under a group policy, members are not generally able to choose their amount of insurance. The cover is determined by the policy owner (e.g. employer or superannuation fund) and this cover is often referred to as default cover. The most common benefit designs are formula based, for example:

• Multiple of salary (e.g. 4 x salary)
• Formula: agreed benefit calculated according to a formula (e.g. 10% of salary x years of future service to age 65).

Another common benefit design is a fixed level of cover, e.g. all members get a fixed cover of $50,000.

Death cover

Cover in the event of death during the term of the policy.

Exclusions

Cover in the event of death during the term of the policy.

There are two different types of exclusions in group insurance:

1. Policy exclusions: In some circumstances, an insurer may need to decline a claim, for example, where a claim is submitted due to intentional self-inflicted harm, suicide, acts of war, or if the claimant had participated in a criminal act.
2. Underwriting exclusions: Underwriting exclusions may be applied to individual members being assessed for voluntary cover, (i.e. when they apply for cover greater than the AAL). For example, excluding the spine, mental disorders, aviation.

Forward Underwriting Limit (FUL)

Forward Underwriting Limit (FUL) refers to the level determined by an insurer after underwriting a member, whereby future increases in member’s cover in line with the benefit design can occur without further underwriting. FULs provide members the option to gain higher benefits without the inconvenience of needing to provide evidence of health when the formula driven levels of cover increase each year as a result of salary increases.*

* Voluntary increases in cover, however, will require underwriting.

Example

Jennifer is a member of a group life policy with a benefit design of 5 x salary, and an Automatic Acceptance Level of $250,000. Her salary is $75,000, which means that her cover remains at the AAL of $250,000 until she is underwritten. Jennifer completes the underwriting process and is accepted by the insurer with an FUL of $750,000. Her new cover, in line with the benefit design is $375,000. The FUL she is given means that her cover will automatically increase each year as her salary increases until it reaches $750,000, at which point she will need to be underwritten again.

Guaranteed renewability

All group policies are guaranteed renewable (sometimes called ‘non-cancellable’) where a life insurer is unable to cancel the policy. An insurer is able to alter the policy terms subject to certain criteria within the premium rate guarantee period. After this period, they may change premiums due to a number of reasons, such as poor claims experience, changes in the demographics of members (i.e. age, gender and occupation), changes in legislative requirements or any other changes after considering the risk profile of the policy.

Nursing care benefit

An ancillary benefit payable under a group salary continuance (income protection) insurance policy, insured members are entitled to this benefit if they are confined to a bed as a result of being totally disabled and requiring full-time care of a registered nurse for more than at least 3 consecutive days during the waiting period.

Pre-existing Condition Clauses

Pre-existing condition clauses prevent insured members from being paid a claim that directly results from a pre-existing condition (includes any diagnosed or a suspected condition) for which the insured member intended to or did seek medical assistance or advice.

Product Disclosure Statement (PDS)

Prepared and issued by the Life Insurance office, this document details all the terms and conditions of their life insurance product.

Ancillary benefit

An ancillary benefit payable under a group salary continuance (income protection) insurance policy, insured members are entitled to this lump sum benefit in the event they suffer one of the specific medical conditions as listed under the policy. This benefit is paid regardless of whether or not they were Totally Disabled by the specific injury or medical condition or have returned to work.

Self-managed superannuation fund (SMSF)

A self-managed super fund (SMSF) is a superannuation trust structure providing members another way of saving for their retirement. Unlike other superannuation funds, SMSF members are also the trustees of the fund, providing them with a greater level of control over their investments and insurance within the fund.

Takeover terms

When a group insurance policy changes insurers, the new insurer usually agrees to ‘take over’ the existing levels of insurance cover on the same or similar terms as the previous insurer. While the new insurer may try to provide a similar product, at times the cost of the cover and terms will be the same, only that the takeover terms stipulates which insurer will be responsible for claims in line with industry terms.

Terminal illness cover

A ‘built in’ lump sum benefit under a group life insurance policy, this benefit is payable in the event that an insured member becomes diagnosed (by two medical practitioners) as terminally ill from a condition likely to result in death within 12 months.

Total and Permanent Disablement cover (TPD)

Cover in the event a member suffers an injury or illness and they are totally and permanently disabled and unlikely ever at any time in the future to resume work in any or their usual occupation. Further conditions apply.

Trauma benefit

A ‘built in’ lump sum ancillary benefit under a group life insurance policy, this benefit is payable in the event that an insured member is diagnosed with one of the listed trauma events under the policy.