One of super’s most overlooked products is its default life insurance. It provides you and your dependants with financial protection in the event of death or disability. Yet many people neglect to get to grips with it.
While super fund performance is constantly in the spotlight, life cover rarely rates a mention. Many fund members remain ignorant of how it works and what’s involved in the event of a claim. Worse still, some members don’t even know they have it.
When you join a super fund, you are automatically given default life cover. It comes without health checks and is provided at cheaper rates than you would otherwise get. This is because super funds negotiate group insurance at wholesale rates on your behalf.
Premiums are usually based on your age and the insured amount. These are deducted from your super and can be a tax-effective way to pay for it. Life cover is generally bundled up with Total and Permanent Disability (TPD) insurance.
You can opt out of your cover at any time. Members younger than 25 have to opt in for it, as typically, young people that age are less likely to have dependants and mortgages.
Because much of this happens by default, disengaged fund members fail to read the fine print and many be unaware they have it.
Check your policy
Xavier O’ Halloran, director of Super Consumers Australia, says more than eight million Australians hold group life insurance in their super costing about $6.5 billion a year.
He urges people to read their policy carefully to see if it’s suitable and check what tests or conditions you might need to meet to make a successful claim.
“For example, TPD insurance policies apply different tests to determine whether someone is disabled. Some are so hard to meet that most people fail when trying to claim.
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Denne historien er fra July 2024-utgaven av Money Magazine Australia.
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