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Insurance in your Superannuation Policy



Do you have personal – Life, Total and Permanent Disability (TPD), Income Protection – insurance? If you think ‘No’, then you might want to think again and check your superannuation policy. Australians are afforded a cost-effective means of having insurance cover within their superannuation policies. This is important because Australians have historically been fundamentally underinsured, if not uninsured.

What do you get from having insurance cover in your superannuation policy?

There are many advantages:

  • Premiums are paid from your superannuation balance. As employer superannuation contributions are taxed at 15%, which is a lower marginal tax rate for most members, paying insurance premiums is tax-effective for members.

  • Premiums are often less expensive anyway as superannuation funds buy insurance policies in bulk. Additionally, the cost is spread across the fund members as a ‘group risk’ instead of the sum of the individual risk of each member.

  • Premiums are automatically deducted from your superannuation account balance. You will not need to remember to pay your premiums and therefore your insurance cover is assured.

  • Most superannuation funds do not require health checks for you to be insured. The Product Disclosure Statement (PDS) will detail any exclusions and the insurer’s coverage of pre-existing medical conditions.

  • You may increase the cover level of any of the included insurances, however health checks and medical records might be required for you to do so.
What insurance cover is included?

For most Australians, insurance in superannuation provides a valuable safety net with most superannuation funds automatically providing cover for Death (Life) and TPD. Whilst some cover levels and the calculation of premiums are individual to a fund, generally three insurances are included for (default) specified levels of cover without requiring medical assessments:

LIFE

Life insurance, sometimes called Death insurance, means your superannuation account will receive a lump sum payout in the event of your death or a terminal illness. Life cover usually ends when you are 70 years of age.

TPD

Total and Permanent Disability insurance means your superannuation account will receive a benefit amount in the event of your suffering a disability that prevents you from working, or that you are unlikely to ever work, post-disability. TPD cover usually ends when you are aged 65 years.

INCOME PROTECTION

Income Protection insurance, also known as Temporary Disability (TD) insurance, means you will continue to receive a substantial portion of your pre-disability salary for a period – up to a determined number of years or up to a certain age – to assist you to maintain your financial responsibilities whilst you recover.

Do you need more insurance than what is offered?

Some extra insurances like Trauma insurance or a more comprehensive Income Protection insurance might be something you need for your personal circumstances. If you buy any of these insurances, including the main three mentioned above, from external insurers – that is, beyond the scope of your superannuation, then cover generally continues until you no longer pay the premiums to the insurer.

Are all superannuation fund members automatically insured?

No. There are some exceptions for younger members (under 25s) and superannuation accounts with low balances.

What can you do to ‘know YOUR insurance in superannuation’?

Consult YML Group to help you review and assess your insurance requirements and how your superannuation policy provides insurance for you. YML’s expertise in superannuation will give you a clear understanding of the insurance in your superannuation policy.

How can YML help?

Talk to our YML Super Solutions Team today to see how YML Group can assist you with your superannuation. For more information, view our website and contact us on (02) 8383 4444 or by using our Contact Us page on our website.

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