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Insurance and your super


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Here’s something you might not know. About 12 million of us have insurance cover through one or more of our superannuation funds1. That’s half of the country.

But guess what? Very few of us know the types and amounts of insurance cover within our super.

Most super funds started by an employer automatically provide insurance to you as a member, and generally, super-provided insurance is an ‘opt out’ system. That means it’s up to you to act, or risk being under or over insured. And in case you’re wondering, yes, you’re paying for this insurance cover through your super.

Because most funds will add you to a default insurance option, it really is up to you to find out if that’s meeting your needs. Financial advisers can help you with this. But before we talk about that, let’s look at the ins and outs of insurance and your super.

For starters, what are the different kinds of insurance cover in super funds?

Understanding insurance cover

Well, there are three main types.

  • Death cover: Or life insurance as you might know it. These policies may pay your nominated beneficiary e.g. partner, children or estate a set amount after your death.
  • Total and permanent disability (TPD) cover: You may be eligible for a lump sum payment, if you permanently can’t work because of a serious injury or illness. 
  • Income protection or salary continuance: This cover may provide income if you can’t work for a period of time because of illness or injury.

Make sure to check your super fund’s product disclosure statement (PDS) – the brochure with all the fine print – to see what’s covered under your fund’s default insurance policy.

Getting insurance savvy

At this stage, you might be thinking you don’t need to do anything about your insurance cover because it’s already taken care of by your super. You might want to think again.

If you’re one of the 39% of Australians who has multiple super accounts, you could also be paying for multiple insurance policies. Multiple super accounts and insurance policies may mean extra fees that can really reduce your retirement balance.

How financial advisers help

Having insurance cover is a good thing, right? Yes, protecting yourself and your assets is a vital aspect of a good financial plan. That’s why you shouldn’t change or cancel your premiums, unless you’re sure they’re not right for you.

To help you think about this, here are some of key differences between insurance cover provided by your super fund and cover provided by a non-super insurer.

Insurance provided by your super

  • Premiums deducted from super balance
  • Cover may be limited and may not be able to be tailored to your circumstances
  • Death benefit and coverage may be less than retail insurance, and may reduce as you get closer to retirement
  • May need to deal with both your super provider and the insurer during the claims process
  • Cover may stop when you’re 60-70
  • May be cheaper than an external insurer, as generally provided as part of a group insurance policy.

Insurance provided by an external provider

  • You can pay separately or within your super
  • Can generally be tailored to personal needs
  • Death benefit and coverage tends to be fixed or increasing cover amounts
  • Generally easier to make claims, as you will deal directly with your insurer or your financial adviser
  • Some cover may last later in life
  • May be more expensive as you hold an individual insurance policy.

Bearing all of this in mind, you shouldn’t rush into a decision about insurance and super. There are a few important steps to take when weighing up your options. It may help to speak to a financial adviser. They can help you take steps to check:

  • If you have multiple premiums
  • Your level of insurance cover
  • If the cover is right for your circumstances
  • Your death beneficiary.

Other steps a financial adviser may be able to help with include:

  • Assessing life insurance needs
  • Looking at income protection
  • Cancelling unneeded policies.

Reach out to us if you decide you want a financial adviser to help out.

This article is intended to provide general information of an educational nature only. It does not have regard to your objectives, financial situation or needs and must not be relied upon as financial product advice. Before you act on this information, you should consider whether it is appropriate for your circumstances. Information in this article is current as at the date of publication. Applications subject to approval and fees and charges are payable. Terms and conditions apply and are available on request.

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