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Insurance and your super

25/01/2024

Get to know your policy.

Here’s something you might not know. Out of the 24 million superannuation accounts open in Australia, approximately 10 million of them have insurance.

So even though nearly half of Australian superannuation accounts include this extra feature, very few of us know much at all about how this works. Here’s a couple key facts about insurance within your super:

  • Most super fund accounts will include insurance
  • The insurance feature in your super account can have an ‘opt out’ or ‘opt-in’ system
  • The costs of insurance is deducted from the balance in your super account
  • Most default insurance provided can be limited and offers only limited coverage
  • Insurance will generally not be provided if you’re under 25 or your account balance is under $6,000.

Understanding what you’re insured for

There are three main types.

  • Death cover: Or life insurance as you might know it. These policies may pay your nominated beneficiary 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, or not 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 have changed jobs and have had new super accounts opened, you might be paying for multiple insurance policies.

Check your super transaction history and/or statements to see how much you’re actually paying in insurance costs. You might surprise yourself.

Ensure this insurance is right for you

Having insurance cover is a good thing, right? Yes, protecting yourself, your loved ones and your assets is a vital aspect of a good financial plan. When you think about it, it does make sense that insurance would be included in your super to future proof yourself against the unknown.

That’s why you shouldn’t change or cancel your premiums, unless you’re sure they’re not right for you. 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 are deducted from super balance
  • Cover may be limited and lack flexibility to meet your needs
  • Death benefit and coverage may cost 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 65-70
  • Premiums may be cheaper as well as more tax-effective
  • A draw back to consider is that any insurance premiums paid from your super will reduce your retirement savings and you may have less when you retire.

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
  • 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 Newcastle Permanent financial adviser to help out.

This article is intended to provide general information of an educational nature only. We do not recommend any third party products or services and we are not liable in relation to them. Any links to third party websites are for your information only and we do not endorse their content. Information in this article is current as at the date of publication.

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