Most superannuation funds offer life insurance benefits to their members. Many people don’t realise they have access to this insurance cover.
Not all super funds offer the same insurance benefits, so it is important to check your super account to see what cover you have and what it is costing you.
Types of life insurances offered through Super funds
There are three main types of life insurance benefits commonly available through super funds. They are there to help you if you can’t work for a medical reason.
TPD (Total Permanent Disability) insurance – gives you money if you become disabled and unable to work.
Income protection insurance (sometimes called salary continuance cover). If you can’t work due to a temporary disability or illness you still get paid a regular income for a set period of time.
Life insurance (sometimes called Life Cover Death Cover). If you die, the people you leave behind (your beneficiaries) get money either as a lump sum or as regular payments. Some policies also cover against terminal illness.
This insurance through super can be important if you don’t have life insurance through another super fund or insurer. Having life insurances is not compulsory but many people choose to have them because they provide peace of mind.
People with children or dependants, or those who work in a high-risk job, often have these insurances. A financial expert can help you decide if you need this insurance.
The advantages and disadvantages of life insurances through Super
Most people in a super fund will automatically get one or more of these insurances.
It can be a cost-effective and easy way to get such insurance. Super funds buy lots of policies so they can often get cheaper premiums. Your premiums automatically come out of your super account – one less bill to pay.
Most super funds don’t require health checks for default cover (but do if you have a high–risk job or have a certain health condition).
Life insurance and TPD insurance through super can be tax effective if your marginal tax rate is more than 15%. That’s because your employer’s super contributions and salary sacrifice contributions are only taxed at 15%.
But life insurances through super is often default insurance and will be for a specified amount and can have exclusions. The amount of cover you can get through super is often lower than the cover you can get outside super, and not tailored to your needs.
You may be able to increase your insurance cover through your super. Depending on your needs, you may be better off getting life insurance cover, or additional protection, through other insurance providers. Talk to your accountant or a financial planner for independent advice on what coverage is best for you.
Other important things to know about life insurance through Super
Super funds cancel insurance on accounts that haven’t received a contribution for at least 16 months. They also cancel insurance where balances are too low. The low balance cut off varies between super funds and super accounts. Your super fund must contact you if your insurance is about to end.
If you are under 25 you don’t get life insurance cover when you join a super fund (unless you work in a high-risk job). You must ask your fund for this cover but may be better off to get coverage from another insurance provider.
For older Australians – super fund TPD insurance usually stops when you are 65. Life cover usually ends when you turn 70.
Insurance through super is not “free”. You pay premiums from the money in your super account which reduces your savings for retirement. If you have more than one super account you may be unnecessarily paying for multiple policies.
Changing super funds? If you want life insurance through super, as well as checking fees and performance of funds, you may also want to compare insurance benefits and premiums as they are not the same across super funds or accounts.
How do I know what insurance coverage I have through my Super fund?
Your super fund can tell you what insurance you have. Call them or check your online super account, your annual statement, or the specific Product Disclosure Statement (PDS) your fund sent you for your super policy.
This should tell you what cover you have, special conditions or exclusions, and the premiums you are paying.
How can Catherine Henry Lawyers help?
We work with many financial planners, so if you don’t have one, we can refer you to one.
Our expert Superannuation and Insurance team can also check your policy for you, so you know exactly what you are covered for. They can also help you make a superannuation insurance claim.
If you have had a superannuation insurance claim rejected or do not think you got all the benefits you should have, we can take on your insurer for you. Our experienced Superannuation and Insurance team are here to help. To confidentially discuss your needs call us on 1800 874 949 or fill in the form below, and we will be in touch.
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