A man who cancelled his income protection insurance without realising he would also end his critical illness cover has won a battle to have the policy reinstated.

TAL Life was correct in cancelling the critical illness insurance but did not clearly communicate how the covers were held, the Australian Financial Complaints Authority has ruled. It was understandable that the man misunderstood the implications of cancelling his income protection.

In 2014, he applied through his adviser for a term life policy owned by his self-managed superannuation fund and an IP policy with critical illness cover that was linked to the life insurance.  

This meant the critical illness cover would reduce the benefit paid under the life policy, so a lower premium was paid.

In 2023, the man asked his adviser to cancel the IP policy. The life policy remained in force.

TAL told AFCA the insured should have known that cancelling the policy would end both his IP and critical illness covers. Its cancellation letter clearly warned reinstatement was not available.

But the ombudsman says that while communications from 2014 and 2023 said the critical illness cover was “linked”, they did not say what it was linked to.  

The complainant cancelled his IP cover because he was unemployed, but it was clear from his instructions to his adviser that he did not intend to cancel the critical illness insurance. He had since been diagnosed with cancer and wanted to claim.

AFCA says the insurer did not meet its obligation to communicate plainly and cover should be reinstated once outstanding premiums are paid.

Read the determination here.