Insurance

Contributed by Paul Bingham and Graham Young and current to 1 September 2005

As mentioned, trustees often, but not always, finance the provision of death and total and permanent disability benefits through a group life insurance policy. Where the trustee is a commercial organisation, the insurer is usually a related company.

Where the benefit is insurance-funded, the trust deed sometimes has the effect that the member is only entitled to the benefit if the insurer pays the insured benefit to the trustee. But there are still two separate decisions to be made. The insurer must decide whether the member is entitled to the insured benefit, and the trustee must decide whether the member is entitled to a disability benefit. The trustee must not simply allow the insurer to dictate what the trustee’s decision is to be. If the trustee considers that the insurer should pay the benefit, the trustee may have a duty to press the insurer for payment.