The National Disability Insurance Scheme (NDIS) is not a replacement for an insurance policy, but many Australians are being lured in by the term ‘insurance’.

The NDIS is a government-funded initiative designed to cover the costs of disability support services for Australians. The trial period is now over and the full roll-out has commenced. However, it’s important to note that the NDIS is not actually an insurance scheme. It doesn’t replace a portion of an individual’s income, pay a lump sum benefit on occupational disablement or diagnosis of a specified medical event, nor does it pay out upon death.

When the Rudd Government first proposed the NDIS, there was considerable concern from the financial sector regarding the use of the words, ‘insurance scheme’. The term ‘insurance’ is defined as ‘an arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness or death in return for payment of a specified premium’. The NDIS is solely funded from tax revenue and does not pay any form of compensation to the eligible person.

Do you still need life insurance?

Yes. The consequence of this incorrect terminology is that some people believe that they no longer need to consider life insurance to protect their income, in the event of disability, because the NDIS will cover them. This is not the case.

What does the NDIS cover?

Some of the benefits provided under the NDIS to eligible Australians (from birth to age 65) are:

>   Aids and appliances – eg. artificial limbs and communication aids

>   Home and vehicle modification costs

>   Personal care such as showering and general hygiene assistance

>   Domestic assistance such as shopping, food preparation and cleaning assistance

>   Respite care

>   Guide dogs.

The NDIS does not pay an eligible recipient any form of monetary compensation. Each eligible person has a ‘package’ put together for them based on their final assessment and meeting a rigorous set of requirements and definitions.

Can Australia afford the NDIS?

Of growing concern is the actual cost of the NDIS. The current levy will raise $3.3 billion per year (rising each year), with a total cost of $22.2 billion in the scheme’s first year. 53% of this will be federally funded and the rest will come from the states. Funding has been allowed for up until around 2020-21, increasing in each Federal Budget, but thereafter the scheme will rely upon new and increased funding being allocated.

The services provided under the NDIS are currently not means tested, but future funding issues could certainly cause this to change over time. At Elston, while we recognise the importance and benefits of the NDIS, we also see the need for our clients to have their own top-up funding in place for the provision of disability care, given the funding concerns of the scheme and the lack of personal control over the services you will receive.

The NDIS will not replace the need for Income Protection, Total and Permanent Disability, Critical Illness and Life Insurance, so it’s important that you still recognise the importance of receiving professional advice regarding your insurance needs.

If you would like more information, please call 1300 ELSTON or email info@elston.com.au and an adviser will be in touch.