Super insurances, or rather personal insurances in general, such as life insurance, total and permanent disability (TPD) and income protection can be worth their weight in gold (literally). There’s nothing worse than having something truly awful happen to you or your family, that is then made even more tragic because you or they are unable to pay the mortgage or other important bills.
But are your super insurances up to doing the job you might need of them properly? Now might be a good time for you to review.
Sure, there are many advantages of insurances paid for within super, but as with all things, you need to make sure that what you’re buying (and yes, you are buying it), fits what you and your family might need it to cover if the worst should happen. After all, you don’t want to be paying for nothing.
Question 1: Do I actually hold any insurances within my Super?
Once upon a time, almost all super came with some level of insurance. However, Super insurances have undergone significant changes as part of the Super reforms that came in back in in 2019. So, now if you’ve less than $6K in your account; you don’t have enough in your account to pay for those insurances; or your account has been inactive (i.e: hasn’t had any contributions for 16 months), your insurance may well have been cancelled – unless you specifically requested your fund to keep those insurances going on your behalf. And if you’re under 25, you won’t be even offered it when you sign up. Tricky, huh!!
Oh and just as an aside, you’ll want to make sure you have your insurances in place (if at all possible) before your health starts to get complicated. For example, if you don’t have your insurances sorted before you have a back, shoulder, neck injury, a cancer scare or are diagnosed with a mental health condition, these are very likely to be excluded from coverage for the rest of your life.
Question 2: Is this the right level of cover for me and mine?
First things first – think about what funds you or your family will need to pay your bills whilst you recover from an accident, pay your mortgage, etc, should the worst ever happen. Also bear in mind that income protection is usually based on a percentage of your salary (not dollar for dollar) – say 90% for the first six months and 70% after that; and think about could your family/partner, etc survive okay (pay bills, rent/mortgages, etc) without your earning capacity in the mix. It’s important to review your numbers each time your personal/financial circumstances change.
Then check if you hold super insurances and if they’re enough to meet the numbers you think you might need.
And check your reductions in coverage over time – insurances often reduce to zero as you age. Plus, check at what age, they cut out completely. Income protection often ends at 70 and TPD at 65 years of age (hint: insurers think you’re supposed to have retired by then).
Question 3: Are you ‘stapled’ to an old fund’s super insurances?
So this is something you can be ahead of the curve, but the time to act is now. Because from November 1, 2021, your insurances will likely be ‘stapled’ to your current fund. And whilst that might not necessarily be a bad thing, if you’ve changed jobs to something a little more dangerous, you might find yourself, not covered at all. For example, you’ve previously been a bank clerk and you decide to switch careers in 2022 to skydiving trainer, pilot, building or mining, your super insurances may only cover you for the indoor, lower risk activities of a teller. Plus, if your old role saw you with a salary of $50K/yr and you’ve moved up to a $70K/yr role, the insurer might have the right to only pay you the proportion of your old salary because you’d not updated your details, or paid a higher premium.
Question 4: Are you covered for ‘any’ occupation or ‘own’ occupation?
Such a small wording difference can have far reaching consequences for income protection and TPD. ‘Any occupation’ means the insurer will likely try to cut you off if you can work in another occupation even if it’s far removed from what you did originally. So if you were an actuary, an accountant or a marketing guru previously, but you’ve sustained an injury that means you can only work in a sheltered workshop as a result, you can work. The insurer’s job is ‘job done – you’re working, they don’t necessarily have to pay you. However if you’re an accountant, like me, and you’re covered for ‘own occupation’, payments for lack of your ability to work as an accountant would remain (either until retirement or until settlement).
And that’s where we can help. If you have questions relating to superannuation or your estate (if the worst were to happen), we’d be delighted to chat further to you. You can call us on 02 6023 1700.