High threshold for Total Disability Insurance

The accident

Douglas had an accident and suffered significant spine damage. He was told by his doctors that without surgery he would suffer quadriplegia. Douglas underwent two successful surgeries, however, he remained with permanent, life changing disabilities. He could no longer work as a builder, go hunting and fishing, or play with his granddaughter.

Douglas made a claim under his insurance policy with Boss Insurance for a Total Permanent Disability benefit and a Loss of Enjoyment of Life benefit.

 

The policy

Under the policy, to receive a Total Permanent Disability benefit following an accidental injury, Douglas would have to suffer:

  • physical severance or total loss of the use of a limb
  • irrecoverable loss of all sight in one or both eyes
  • entire and irrecoverable loss of hearing
  • entire and irrecoverable loss of the ability to speak.

If Douglas did suffer one or more of these permanent injuries, he could additionally claim for a Loss of Enjoyment of Life benefit. Loss of Enjoyment of Life was defined in the policy as the inability to undertake one or more of the following activities without assistance:

  • dressing and undressing
  • washing, bathing and toileting
  • eating and drinking
  • general household duties
  • shopping.

 

Douglas’s view

Douglas argued that following his accident he suffered permanent injuries which resulted in a loss of enjoyment of life and that this loss of enjoyment of life was akin to the list of activities provided in his policy. 

Douglas said he had taken the insurance policy with Boss Insurance because he thought the insurance policy provided cover equivalent to income protection insurance.

 

Boss Insurance’s view

Boss Insurance found that Douglas’s injuries did not meet its threshold for a Total Permanent Disability benefit under the policy. Having found that Douglas had not suffered a Total Permanent Disability, Boss Insurance said Douglas was not eligible to claim for a Loss of Enjoyment of Life benefit.

 

FSCL’s view

We found that Boss Insurance was entitled to decline Douglas’s claim. Although Douglas suffered permanent disabilities, Boss Insurance provided its own definition for ‘permanent disability’ under its policy. As Douglas’s permanent disability was not included in the policy’s definition of permanent disability his claim fell outside the scope of the policy.

 

Lesson

An insurance policy is a contract and insurance companies will define the scope of cover under their contracts. Make sure you are familiar with the definitions provided in your insurance policy as they might differ from the meanings you may expect.

Douglas mistakenly thought his insurance policy provided cover equivalent to income protection.  Think about the type of circumstances you want your insurance to cover and check that this is what you are insured for.

You may wish to seek the assistance of an insurance adviser to ensure that you have the insurance cover most suitable for your needs.