Why the National Disability Insurance Scheme (NDIS) is not a substitute for life or disability insurance

You may have seen the National Disability Insurance Scheme (NDIS) back in the news recently. The federal government is currently looking at ways to improve funding for the $22 billion scheme over the long-term, which will provide a massive escalation in support.

This news will come as welcome relief for those Australians living with permanent and significant disability, as well as their families and carers. However, it is important to remember that despite being labelled as an ‘insurance scheme’, the NDIS is no substitute for traditional forms of life insurance, including Income Protection.

No doubt this may cause a great deal of confusion for everyday Australians, and the real danger is that this misinterpretation may be giving people the false belief that they are financially protected against disability when they are not, resulting in even greater levels of underinsurance. The danger grows even more considerably for those who do not seek out professional financial advice.

What is the National Disability Insurance Scheme?

The National Disability Insurance Scheme (NDIS) is a Labor Government initiative, launched in July 2013 that will progressively roll out across Australia to July 2019. In simple terms, the NDIS provides long-term, high-quality support for people with a permanent and significant disability. This includes people whose disability is attributed to intellectual, cognitive, neurological, sensory, or physical impairment, or a psychiatric condition.

The NDIS replaces the previous state-based schemes that resulted in differing levels of care, dependent on an individual’s state or territory of residence.

Who is eligible to receive funding under the NDIS?

Eligibility is based on three main requirements; age, residency and level of disability.

Age: Participants must be under the age of 65 when they become disabled, as well as when they join the NDIS. Once they are covered under the scheme, support is installed for life.

Residency: Participants must reside in Australia, be a citizen or have the appropriate visa. Until coverage is complete in July 2019, only certain roll-out zones in Australia will provide NDIS support to residents.

Level of disability: Participants are required to be permanently disabled. This can include a disability that is ‘episodic’, meaning that some days are more affected by it than others.

There is an accessible online list of questions called the Access Checklist that can quickly determine whether or not someone qualifies for care under the NDIS.

What is the difference between the NDIS and life insurance?

The NDIS does not replace the benefits provided by life insurance products such as Income Protection or TPD cover. These forms of protection provide either a lump sum payment selected by the client, or an income stream based on the client’s income should they suffer a permanent or temporary incapacitation that prevents them from returning to their previous level of work.

It is important to remember that the NDIS does not provide financial support. It only covers the costs of care and support for eligible participants.  The NDIS does not provide a lump sum payment, nor replace any income lost by participants due to their inability to work. The NDIS is particularly aimed at those in our community who were born with intellectual and/or physical disabilities and who need specialist care from birth.

The NDIS is not a risk prevention tool – it is a safety net. Unlike TPD and Trauma insurance and Income Protection, the scheme does not allow an individual to protect their assets, safeguard themselves and their family against future losses, or pay down financial obligations such as a mortgage.

What is covered by the NDIS?

The NDIS protects any Australian (whether they can work or not) from the possibility of not being able to afford proper care and treatment for their disability. It does not help pay for day-to-day living expenses.

Some of the most common benefits provided under the NDIS to the eligible are: 

  • Aids and appliances (e.g. artificial limbs and communication aids)
  • Home and vehicle modification costs
  • Personal care (e.g. showering and general hygiene assistance)
  • Domestic assistance (e.g. shopping, food preparation and cleaning assistance)
  • Respite care
  • Guide dogs.

There is no substitute for peace of mind.

For the everyday Australian, there should not be a choice between the NDIS and Life Insurance. It is impossible to predict whether a future disablement will be severe enough to qualify for the NDIS. Life Insurance products like Income Protection allow individuals to take control should the unexpected happen and ensure they can continue paying day-to-day living expenses such as the mortgage, general medical appointments and keep food on the table. 

While the NDIS is a big step forward and will assist thousands of Australians living with a permanent disability (as well as their families and carers) it is not, and was never intended to be, any type of substitute for the financial protection of life insurance.

More information on the NDIS can be found at www.ndis.gov.au.


Important information: The content of this publication are the opinions of the writer and is intended as general information only which does not take into account the personal investment objectives, financial situation or needs of any person. It is dated March 2016, is given in good faith and is derived from sources believed to be accurate as at this date, which may be subject to change. It should not be considered to be a comprehensive statement on any matter and should not be relied on as such. Neither Zurich Australia Limited ABN 92 000 010 195 AFSL 232510, nor Zurich Investment Management Limited ABN 56 063 278 400 AFSL 232511 of 5 Blue Street North Sydney NSW 2060, nor any of its related entities, employees or directors (Zurich) give any warranty of reliability or accuracy nor accept any responsibility arising in any way including by reason of negligence for errors and omissions. Zurich recommends investors seek advice from appropriately qualified financial advisers. Zurich and its related entities receive remuneration such as fees, charges and premiums for the financial products which they issue. Details of these payments can be found in the relevant fund Product Disclosure Statement. No part of this document may be reproduced without prior written permission from Zurich. CLYH-011173-2016