Double super, zero worries: Ensuring superfund insurance continuity
Did you know that April 1 wasn’t just for pranks in 2020? Nope, there were some sneaky changes in the law that could totally impact your insurance in superannuation fund. And of course, no one's really talking about it. Read on before you encounter another surprise!
Recent changes to the laws mean if you don't opt-in for default cover in your super fund, you're gonna be in some deep doo-doo. Lucky for you, this blog post is here to explain what this means to have default cover, having to opt-in to maintain the cover, and what'll happen if you don't.
Government protection for your super fund
To safeguard retirement funds, the government has implemented the Putting Members' Interests First (PMIF) reforms. These reforms require certain Australians to opt-in for life cover through their super, protecting them from unwanted insurance premiums that erode their retirement savings. The legislation applies to individuals in the following scenarios:
Super balances under $6,000: If your super balance falls below this threshold, it is important to opt-in for default cover to ensure your insurance remains intact.
Inactive super accounts: Super accounts that have not received contributions for at least 12-16 months also fall under the PMIF reforms. Opting-in for default cover is crucial to prevent the cancellation of insurance due to inactivity.
New super fund members under 25: Members under the age of 25 are required to opt-in for default cover to ensure their insurance remains active.
How do you make sure you keep your insurance?
If you are retaining any cover within super, make sure you reach out to your super fund and opt-in for cover. This way, you're telling them not to cancel your insurance if your super fund stays inactive for 12 months. It's a simple step to ensure your cover doesn't go down the drain.
Note: Your superannuation fund will probably reach out to you if you're affected. However, the opt-in processes may vary slightly between different funds.
Remember, it's essential that YOU take action. An adviser can't opt-in on your behalf.
If you have multiple super funds, you can also transfer existing insurance from one super fund to another without needing to go through underwriting. Check with your super fund to walk through this process.
Risks of not opting-In for cover
Failure to opt-in for default cover within your super fund can have significant consequences. By not taking action, you expose yourself to the following risks:
Loss of insurance cover: If you do not opt-in for default cover, your insurance may be cancelled, leaving you without essential protection for unforeseen events.
Being unable to make a claim: Without insurance cover, you and/or your dependents or beneficiaries will not receive any insurance benefit in the event of your death, disability or illness.
Facing difficulties in getting cover: Some folks might face difficulties in getting insurance cover due to existing medical conditions or age restrictions. By cancelling your existing policies, you might find it tough to reinstate the same level of cover or get insurance from elsewhere without a higher premium.
And hey remember to check your super statement, product disclosure statement (PDS), or consult with a financial adviser to make informed decisions regarding insurance cover that suits your individual circumstances.