Superannuation

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Insurance inside super

Most superannuation funds (and many industry funds) offer Life and Permanent Disability Insurance. Some funds also offer Income Protection cover (also known as Salary Continuance):

  • Life Insurance – Provides a lump sum benefit to your family at the time of your death.
  • Total and Permanent Disability Insurance (TPD) – Provides a lump sum payment if you are totally and permanently disabled before you reach retirement age.
  • Income Protection (Salary Continuance) – Can provide a monthly benefit generally of up to 75% of your normal income in the event of disability and your inability to work.

You should also consider taking out a Trauma Insurance which pays a lump sum benefit on the occurrence of a specified non-fatal illness or injury. However, this insurance is generally not offered by super funds. 

Please check with your fund about the insurance they offer and what it will cost you.

Watch our webcast about insurance inside super

Benefits of purchasing insurance through your super fund

  • Industry super funds can often negotiate wholesale insurance rates, so premiums for life insurance are often lower than can otherwise be obtained.
  • The premiums are deducted straight from your super account
  • When you join a super fund, you may be offered an automatic minimum level of insurance. You can request an increase to your insurance cover by contacting your super fund. 
  • Because most funds can secure a level of Automatic Acceptance Cover under a group contract, you can generally be provided with a minimum level of insurance cover regardless of your medical history or pre-existing conditions.

To find out if you have insurance cover through your fund, check your latest super statement.

What to look out for

  • If you are rolling out of your super fund, be aware that your insurance cover may automatically be cancelled. If this amount of insurance cover is still required, you may be able to apply for replacement insurance cover with your new fund before rolling over. Carefully consider any terms and conditions of the replacement insurance, such as applicable waiting periods. You will most likely need to be medically assessed when applying for replacement cover.
  • The insurance premiums are deducted from your super balance - if you are not contributing to your super, the premiums will gradually reduce your balance.
  • If you prefer not to be covered through your super fund, it is up to you to contact your fund to cancel your cover.
  • If you have multiple super accounts, you may be paying multiple insurance premiums. If this is undesirable, you should consider consolidating your super accounts, but make sure you investigate which fund's insurance cover suits you best.

Types of insurance cover

Life Insurance

Most people underestimate the level of life insurance they need. The insured sum should be enough to clear net debt, cover future expenses such as school fees, and provide an adequate replacement for the income that the deceased would have earned through to their normal retirement age.

For a breadwinner with young children, an appropriate amount may be well in excess of $1 million. Primary care givers should also consider insurance: who’s going to look after the kids if they were to die?

Read more or try our Life Insurance Calculator to see if you have enough life insurance

Total & Permanent Disability (TPD)

Total and Permanent Disability (TPD) cover is often taken out in conjunction with a life insurance policy. It provides a lump sum payment in the event that you become totally and permanently disabled.

There are often two definitions of TPD available under TPD policies:

  • One is an ‘any occupation’ which is often a difficult definition to satisfy as the incapacity to meet the definition is usually severe, such as loss of two limbs or total blindness.
  • The second definition, ‘own occupation’, may only require you to be unable to perform at least three of your regular duties required of you by your occupation. This definition is easier to claim on.

Income Protection (Salary Continuance)

What would your future look like if suddenly you were unable to work? For most of us, the ability to earn an income is our most valuable asset. Depending on your age, your future income may well be worth far more than a house and its contents, a car, a boat and a holiday home all combined.

Yet few people properly insure their income, and if illness or injury prevents them from working, financial hardship often results. With around half of us likely to spend more than three months off work due to ill health during our working lives, Income Protection insurance should be the first item on the personal insurance shopping list.

Income Protection, or Salary Continuance, will pay you up to 75% of your normal income if you are unable to work due to illness or injury.

Benefits are taxable, and commence after a waiting period. Payments continue to be made until you return to work, or until the benefit period expires. The waiting period and the benefit period are selected at the time of application.

Get advice

Insurance is a complex area. Policies vary in their detail, and insurance companies differ in their approach to processing both applications and claims.

Each type of insurance has a role to play, and an Adviser can help to work out the right amount of each insurance for you. You should also seek advice whenever you consider allowing a policy to lapse, to ensure you are fully aware of the potential consequences.

 

I want to speak to an Adviser about my insurance

Contact Us to arrange for an Adviser to call you back when it suits you.

 

Last updated on 21st March 2012