In today’s unpredictable landscape, superannuation schemes extend a robust safety net, offering members various insurance options including life, total and permanent disability (TPD), and income protection.
Exploring the array of insurance offerings within your super fund is crucial. By evaluating your coverage against external alternatives, you can pinpoint the policy that best aligns with your needs.
Within super, three primary forms of life insurance are typically available:
- Life Cover: Often referred to as death cover, this provision ensures a lump sum or income stream is disbursed to designated beneficiaries upon your demise or terminal illness diagnosis.
- TPD Insurance: Designed to provide financial relief in cases of severe disability that render you unable to work.
- Income Protection Insurance: Commonly termed salary continuance cover, this facet ensures a regular income stream for a specified duration should temporary disability or illness impede your ability to work.
Super funds commonly automate the provision of life cover and TPD insurance, with some also including income protection insurance. Such insurance is typically accessible without medical assessments, albeit for a predetermined sum.
Notably, TPD insurance within super typically ceases at age 65, while life cover typically concludes at age 70. Conversely, external insurance often persists as long as premiums are paid.
Addressing Inactive Super Accounts:
- Legislation mandates the cessation of insurance on inactive super accounts, defined as those lacking contributions for at least 16 months.
- Additionally, super funds may impose their own regulations, including terminating insurance on low-balance accounts.
- Members are notified by their super fund before insurance cessation. To retain coverage, proactive engagement with the fund or contributions to the account are necessary.
Considerations for Individuals Under 25 or with Low Balances:
- Insurance isn’t automatically provided for new members under 25 or those with balances under $6000.
- Exceptions exist for individuals engaged in high-risk occupations, subject to the fund’s discretion.
- Existing insurance isn’t typically jeopardized by falling below the $6000 threshold.
Assessing Insurance via Super:
- To ascertain your super insurance details, avenues include contacting your fund, accessing online accounts, or reviewing annual statements and Product Disclosure Statements (PDS).
- Vital information includes the type and extent of coverage, premium amounts, and policy conditions.
Pros and Cons of Super Insurance:
Pros:
- Cost-efficiency: Premiums are often lower due to bulk purchasing by super funds.
- Convenience: Premiums are deducted automatically from super balances.
- Reduced Health Scrutiny: Default cover is typically granted without extensive health assessments.
Cons:
- Limited Coverage: Super insurance may offer less coverage tailored to individual circumstances.
- Coverage Termination Risk: Changing funds or inactivity may lead to coverage cessation.
- Impact on Retirement Savings: Insurance premiums diminish super balances, impacting retirement savings.
Conclusion:
Navigating insurance within super necessitates meticulous scrutiny to align coverage with individual needs. Awareness of policy specifics, including limitations and termination risks, is paramount in ensuring comprehensive financial protection.
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