Check your insurance cover too

When your annual statement arrives, look beyond the investment return to make sure you have the right insurance cover

- Vita Palestrant

In the next few weeks your annual super statement will hit your inbox with important information. While most people stop reading their statement once they’ve checked their investment returns, it’s worth paying extra attention to your life cover too.

Default death and total and permanent disability (TPD) cover is one of the most overlooked parts of super, yet it is there to provide you and your dependants with financial protection if you die or are unable to work due to injury or illness.

As a super fund member, you get affordable default cover automatically regardless of any pre-existing health conditions. The cost is based on your age and the sum insured.

Alex Dunnin, executive director of research and compliance at Rainmaker, which publishes Money, says Australia’s super system is unique. Pension funds in other countries don’t provide life cover. “Here, it’s a direct conduit to 95% of all workers in Australia. We can use the raw firepower of super funds to help people get a good deal on insurance.”

The funds negotiate with insurers for default cover – “where people walk in, sight unseen and automatically get insurance” – with premiums based on wholesale rates.

Research by Plan For Life, which is part of Rainmaker, found life insurance bought through a super fund is considerably cheaper.

“Plan For Life compared the cost of buying insurance through your super fund with buying it directly off the internet. It’s so much cheaper through a super fund. In some cases, it can be half the price. It highlights that fund insurance can be a good deal,” says Dunnin.

Even so, you need to familiarise yourself with its terms and conditions, particularly for TPD, where definitions and exclusions can be complex. Make sure you are correctly categorised.