Posted on 10/03/2021
Many superannuation funds automatically provide insurances, subject to any applicable eligibility requirements, that could help support you, and/or your family financially, if you can’t work due to injury or illness, or even worse - if you were to die prematurely.
Unfortunately, many people don’t pay much attention to whether they have these insurances, and if they do, how much insurance they have until sometimes, it’s too late.
According to Opel Nelson, Associate Financial Planner at Statewide Super, these insurances can vary considerably, so it’s important for superfund members to find out exactly what they’re covered for, and how much they are paying for it.
"The reality is that most of us know someone who has had to take time out of the workforce, or maybe even had to retire early. We don't hesitate to insure our car or our house, but often we overlook our most important asset, our life and our ability to earn an income,” Opel said.
There are generally three key types of cover available to members through superannuation funds in Australia. The types of cover which may be available through super are:
A lump sum payment, paid to your beneficiaries in the event of your passing.
- Total and Permanent Disablement
A lump sum payment that's paid to you if you're not likely to ever work again. Generally, for policies in super, this means never being able to return to the workforce again. It is possible however to get cover that would pay out if you can't work in your actual occupation – great for highly skilled work or professionals.
- Income Protection
A monthly benefit that's paid to you on a temporary basis if you're unable to work due to sickness or injury.
Trauma insurance is a different type of insurance which is generally not available through super and is paid for out of personal income or cash flow:
- Trauma Insurance
A lump sum payment to help with any immediate expenses or financial needs in the event of a critical illness or injury, such as a heart attack, stroke or cancer.
As insurance definitions and inclusions can differ greatly, it's important to check the policy that applies to your insurance.
“Having the right type of cover in place can be really important, so if you have insurance through your super, spend some time getting familiar with the details,” Opel said.
“Your insurance cover needs may change throughout your lifetime, so it's important to review your insurances regularly, particularly if things change as a result of getting married, having children, buying a house, or going through a relationship breakdown.”
“If you have a partner, it can be important that they do the same. It's not the most pleasant chat, but it's important to have the discussion sooner rather than later.”
Finally, rules around insurance through super require funds to cancel the insurance of super fund members who have an inactive account (that is, no contributions or rollovers over a 16 month period).
Super funds are required to notify their members if they are at risk of having their insurance cancelled in this situation.
Members with an inactive account (< 16 months) who want to keep their insurance may either:
- activate their account through contributions or rollovers; or
- opt-in to keep their insurance (despite any period of inactivity in their account).
If you're a Statewide Super member make sure you review the Insurance in your Super Booklet for further information, or make a time to speak with one of our financial planners. It is important to understand the impact that insurance premiums can have on your super savings.