What is the best loss of license cover in Australia?
 

I am new to this forum and was hoping someone could tell me what the best loss of license cover is and if I am required to be a member of their union/organisation or not?


thanks


Smithy

I have LOL insurance with Comminsure which is through Commonwealth Bank. It will pay me until age 60 if I lose my medical rather than only for 5 years like most policies.

Have a look at the AFAP MBF. I have been a member for many years and whilst I have never had reason to make a claim I know of others who have and they have had no issues, in fact the MBF has been very good

Comminsure will only offer LOL insurance to pilots employed in the airlines namely the Qantas and Virgin groups. It is not available to commercial pilot licence holders so Comminsure inform me.

AFAP MBF: during 30 years plus of membership one claim resulting in 4 monthly payments due to using all sick leave then after retiring all my annual dues refunded.

Has looked after many, many genuine pilot claims very successfully for a long time.

What other insurance company will refund your dues at the end?

MBF is the go.
Anyone that believes an insurance company will let you sit on your arse earning pilot wages til age 60 is kidding themselves.

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I think VIPA VLF is the best product (stand to be corrected by those with better info) but it is a bit riskier because it is a mutual style of fund and is still fairly new. Also it is only available to Virgin Group pilots, I think.

Also, Comminusure is not a loss of licence insurance, it is income protection which is different. Loss of licence typically pays out a lump sum, which may or may not be taxable, whereas Income protection pays a percentage income for a defined period. Not sure about the tax implications, but I'm guessing it is taxed at the same rate as income.

How else does one earn pilot wages if not by sitting on your arse?

Mutual benefit funds are not as safe as people like to think
 

Hi All,

Buzzy, your comment about insurance companies is both factually and anecdotally incorrect. In fact there should be more concern about the MBF than Comminsure or other insurers. And to be clear they are all a little bit different so be careful you compare with a bit of context in mind.

Firstly, the MBF is not insurance, even though it does everything it can to make it look like insurance. It makes it very clear in the documentation, and nor would it want to be, or else it would be subject to the same draconian laws that exist for insurance companies. Without all those compliance costs it can keep its overheads low and the amount of red tape down. That said, those draconian laws that apply to insurance companies provide consumers with the best legal protection in the world. Australian insurance law, while large and unwieldy, has consumer protection in mind more than any other jurisdiction in the world. That being the case, organisations like the MBF and the VLF (Vorsicht, they are both mutual funds) have relatively little legal protection for consumers and leave it up to the integrity of those running the show. To date it would seem by the stories we hear here and elsewhere that the MBF pays its members as and when appropriate, but there have been stories in the past of mutual funds descending into a horrible mess due to ignorance, greed and corruption. I'm not suggesting the MBF is anything like that but just be aware that anything is possible. And just so you know, ASIC does keep an eye on these organisations to make sure they are playing by the rules but at the end of the day their power - and yours if you ever need to litigate against the MBF - is limited.

It's an interesting fact actually, that to qualify as a mutual fund rather than an insurance company, an organisation must not carry on their business as if it was an insurance company. Sounds like an obvious statement, but the essential element of an insurance company is that it is obligated to pay the insured upon the triggering of an event. Consequently, organisations like the MBF are therefore required to make that payout discretionary or else they turn themselves into an insurer and subject to all those horrible rules (Check out the Insurance Contracts Act if you are up for some fun reading!). Organisations like the MBF tread a thin line here and there is more to this, but in short, ASIC is ok with how these guys operate. It seems to me though it would always feel a bit like skating on thin ice. The scary scenario is where one day ASIC decides that the MBF (and others) is actually an insurer and requires them to set themselves up accordingly. All that extra cash they have might suddenly disappear! It is a a very real possibility btw, so don't dismiss it.

For those who are not fans of insurance, a little education always helps understand how it works. Firstly, don't lie or misrepresent when you apply for your insurance, or else all that money that you pay in premiums may one day amount to nothing when you submit a claim. If you play by the rules when buying insurance and you are granted the cover, the insurance company has little option but to pay you out eventually as long as you have operated in good faith throughout the process. They may deny the claim initially but this will usually be part of the game that they play. The law is on your side. And know for what you are being covered! Obvious statement, but people often get a surprise when their claim is denied..

Furthermore, to use the Comminsure example, the total amount they pay out, even though it is intalments as Vorsicht points out, is far larger. Last time I looked, the MBF total was $550,000, whereas Comminsure will pay out $2 million. For me, I would much prefer to have the latter! And when you consider that many employers will pay some or all of the premium cost, to me it's a no brainer; I'll go with Comminsure every time even though the premium cost is higher (my employer pays a good chunk of the premium).

As for the anecdotal evidence, I know several people who have insurance with Comminsure and it has saved their bacon. One of those is a close friend who was diagnosed with severe depression about 15 years ago. He hasn't been able to work since and is still receiving insurance payments. Of course he hates being in this situation and is doing everything he can to get back to work and Comminsure is helping with that as well. I also nearly used it a few years back after an accident that left me a bit broken up. Comminsure were great in their handling of the situation but in the end I didn't go down that path for several reasons.

Hope that helps. I'm not suggesting people go either way specifically, but it does concern me that the conversation is fairly unbalanced out there on this subject and not always supported by a strong understanding of the facts.

There are several variables in the CommInsure product that may not work for you depending on your current flying job.
For example
CommInsure:
MBF:
So it is easier to get into the MBF than CommInsure, and it covers GA (including Ag) where as CommInsure does not.

As for the Money side of things it would be a bit hard to compare apples with apples here as they offer two slightly different products.
The MBF has given it a go however with the following PDFs
http://www.aapmbf.com.au/content/AAP...Electronic.pdf
http://www.aapmbf.com.au/content/AAP...Electronic.pdf

Go Comminsure. Various policy options including 75% of salary until 60 years old (payouts are CPI adjusted each year) capped at $2 million. Its not pilot specific and if you have grief the insurance ombudsman can wade in... not so for the MBF i believe. MBF would also require you join AFAP.

Comminsure
 

+1 for Comminsure.

PG

I think people are confusing Loss of Licence and income protection here.

They are not the same thing and are both designed for different purposes.

I personally don't believe they are interchangeable either.

Comminuse don't offer Loss of Licence insurance and never have.

What comminsure do offer is income protection. Income protection will normally offer you 75% of your salary till age 60. Comminsure have a $2m cap. These benefits are made monthly and are fully taxed. As such the premiums are fully tax deductible. This means you will never receive the full $2m after you pay tax. At best you'll receive 70% of that amount and at worst a lot less. Given that benefits are paid monthly, for most people it will take a decade or more to reach the Cap. During that time this is your only income. Income protection is offset agains any other earnings so of you got yourself another job, your monthly payments will be offset by what else you have earned. If the salary of your new job exceeds 75% of your previous salary, your income protection payments will cease altogether. There is a formula which allows you to earn slightly more but you get the picture. LOL generally has no such offset.
Comminsure raised their premiums by a considerable amount a few years ago and they do not offer exclusions. Older policies (which are no longer available) would place exclusions on you for previous illness or injuries. What that meant was they would still cover you for everything else but not the pre existing condition. CommInsure will reject your application fully if you have any pre existing condition that don't fit a very narrow band. Many people are finding they cannot actually get cover now. Your actual payout is based on your average salary over the previous 12 month. Lose your job, get demoted, have extended leave etc will all affect your monthly benefit. Even though your premium may have been based on a much higher salary, your actual payout could be far less.
Whilst insurance companies are bound by different laws and regulation to an MBF organisation, they are still in the business of making money for shareholder and will often do whatever it takes not to pay claims. Newcastle earthquakes and Queensland floods spring to mind.

Unfortunately CommInsure are the only major insurance company still providing Income protection to pilots. The other providers withdrew their policies years ago. I'm lucky enough to still have one of these policies active.

Given that CommInsure is not a Loss of licence product, many Aviation employers will not allow their LOL allowance to be used for such a purpose. My company have made it quite clear that as stated in our EBA, the allowance for LOL is for LOL only. Other companies may not see it that way though..

Loss of Licence cover does offer a sudo version of income protection which will pay monthly benefits, which will also be taxed, however it also offers a lump sum option (tax free) and a death cover both of which Income protection do not offer. This is why income protection cannot replace loss of licence which in turn cannot replace income protection. This is the reason I personally have both.

The MBF are not an insurance company and have never claimed to be. They have never pretended to be such. Some of the reasons they are not is because it not available to everyone (you must be an AFAP member) and after 20 years and retirement, they refund all your contributions back to you. I've never seen an insurance company do this before. The MBF now operate under a FSL so do report to ASIC. They are also bound by the fund rules and are independently audited each year to confirm compliance. Having been around for well over 50 years their track record is more than proven. Have they denied a claim? Sure. There are always two sides to every story and they don't do it for no reason. Has an insurance company ever denied a claim?

If I lose my licence I receive the MBF benefit of $800,000 tax free. This pays off my mortgage which represents about 25% of my monthly income and leaves me with quite a few hundred thousand in the bank. My income protection pays 75% of my current income. Having used some of the $800,000 to pay off my house, the results in is that the income protection is providing me with exactly the same net income as I had previously when paying a mortgage. My life goes on and I don't have to change a thing. If I only had one or the other I'd have to either downsize my house, take the kids out of private school or make other cuts to spending to be able to maintain my life on 75% of my previous wage.

Not all Loss of Licence policies are the same either despite that appearance. Some will only make a lump sum payment after a long waiting period during which time only taxable monthly benefits are paid. Take X number of years worth of tax off the headline payout figure and that's the real amount of cover you have.
There is a big difference between Death and accidental death. Only about 1% of the population die through accident. This makes an accidental death policy effectively worthless. Don't be fooled by offers of exceptionally large death benefits if it's only accidental death that is covered. If cause of death is for example cancer, heart attack, stroke, brain tumour, you have no cover!

With all policies, don't just read and believe the glossy brochure left in the crew room. Read and understand all documentation available including the PDS or fund rules/ constitution. The devil is always hidden in the detail.

If you don't understand insurance speak, have a qualified financial advisor, insurance agent or your solicitor explain it to you. You may be very glad you did?

These products are all very personal and what works for one, doesn't necessarily work for another. What Products and policies I think are good, may not necessarily be good for another.

Do your own research, understand what you currently have or are looking for and don't take anything at face value. Don't believe the glossy brochure in the crew room. More to the point don't take advise from pilots who generally aren't qualified to discuss insurance, haven't actually read or more importantly understood their own LOL/income protection policies. I'm not qualified either so don't take my word for it.

Do your own research and speak to qualified people before making any decisions.