Is my superannuation insurance enough?
Does my superannuation life insurance keep me covered?
What you need to know about super fund policies
Do you need life insurance if you have coverage through your super fund?
Up until recently, most super funds automatically included a life insurance policy with your super account. So, it’s no surprise that more than 70% of Australian life insurance policies are held through super funds.
Let’s take a look at super fund policies and what to look out for when you’re checking if you’re covered with confidence.
No-frills default insurance
The life insurance policies that used to come with every superannuation fund account are general, no-frills policies with the same rules, definitions, exclusions and conditions applying to everyone.
The insurance companies won’t ask you to jump through hoops for cover, but they also won’t take your personal circumstances into account with the cover they provide. Take it or leave it.
More insurance choice
The automatic policy was never a free part of your super. Unless you make extra contributions to cover the cost, the premiums could see you with less in the bank at retirement.
Automatic cover came to an end in mid-2020 to stop insurance premiums eroding retirement savings. Now’s a great time to see if you’re paying too much for cover that doesn’t have your back.
What to ask about your super insurance
Can I choose my own cover type through super insurance?
Not all types of life insurance products are offered by all super funds. Your personal circumstances may be best suited to several products bundled together for the cover you need. Picking and choosing a custom policy is impossible if you’re relying on your super insurance.
What to ask your super fund: Can I customise my insurance coverage?
Am I covered as I get older?
Most general insurance policies stop cover at age 65 or 70. This is just when many people need it (and it could be tough to get new cover at that age).
And you might only get two years of support from an income protection policy under your super policy. With an individual policy outside of super, you stay covered for as long as you keep paying the premiums.
What to ask your super fund: How long am I covered for income protection? Does my policy have a time limit?
Are my premiums value for money?
Life insurance companies consider past medical history and whether you’re likely to get sick when they’re deciding about offering you cover. This also affects the premium they charge. The absolute best time to get life insurance is when you’re young and healthy. You’re low-risk, a safe bet. You could get better cover than what you currently have without paying more.
What to ask your super fund: How much are my premiums?
Am I covered?
Insurance policy providers need to hedge their bets when offering no-questions-asked cover. You’ll find them managing this risk in the fine print with specific definitions and exclusions. It’s this fine print that will decide if your claim is denied down the track.
What to ask your super fund: Am I covered for this type of activity or accident?
Is there a limit to my cover?
There may be limits on cover available through your super fund and it may not be enough to provide the financial safety net you need when facing the loss of a loved one, or going through a serious illness or injury.
What to ask your super fund: Is there a limit on payouts across my life insurance policies?
How can tax affect my insurance?
There are some hard and fast rules about how super funds distribute funds. Your insurance beneficiary may be on the receiving end of a hefty tax bill if they don’t meet the criteria.
What to ask your super fund: Does my insurance beneficiary meet your criteria to receive funds?
Stay across your super to stay insured
Under the new rules, if your contributions stop and your super account is inactive, your cover could be cancelled. This is an important one for parents and carers who might be taking time out of the workforce - yep, usually women.
You could be left with no cover at all. And your cover isn’t guaranteed if you change super funds.
There’s a bunch of stuff to consider when thinking about life insurance. We’ll be upfront about whether you’re getting the insurance cover you need in your super.
What’s next: Grab your super statement to find your current insurance fees - then give us a call.
