Recent legislative changes have affected the way many Australians are provided with life insurance through superannuation (super). We outline what’s changed so you can understand if you’re likely to be impacted.
When it comes to ‘life admin’, there’s often a lot to keep on top of.
While we’re focused on paying the bills, saving for the future or setting up the life we dream of, it’s easy to miss some of those other changes which can have an important impact on our lives.
Recent changes to the law that affect the way Australians are provided with life insurance through their super, could place some members at risk of finding they’re without cover only when they go to make a claim.
Understanding what these changes are can help you identify whether you’re likely to be affected, and what your options are if you feel insurance through super is right for you.
So what’s life insurance through super?
Over the years, insurance through super has provided financial support to millions of Australians and their families in times where they’ve been unable to work due to sickness or injury, or in the event, they’ve passed away.
On joining a super fund a level of death and total and permanent disablement (TPD) cover, and in some cases income protection, may have been automatically provided – with the ability to switch it off if you wanted to or adjust the cover to meet your needs.
This feature of superannuation has provided many Australians with life insurance cover they may not otherwise have had in place.
So why have things changed?
These changes are designed to help prevent insurance premiums from unnecessarily reducing retirement savings in super. However, they may result in some members who want to be covered, not having insurance in place. There are some exceptions to these changes, for example, if your super fund classifies you as working in certain dangerous occupations.
It’s important that you consider your personal needs when looking at whether to retain existing insurance cover through super or opt into life insurance cover provided through super.
And what are the changes?
The changes to legislation on 1 April 2020 affect when cover starts for new members and how long their cover remains in place. This follows prior changes on 1 July 2019 which means members may lose coverage if their account becomes inactive.
When it comes to understanding the impact of these changes, it’s helpful to break them down by the different ways individuals may be affected.
If you’re under 25 years old when you join:
If you’re under 25 and join a super fund for the first time from 1 April 2020, the cover will not automatically be provided. You will need to have at least $6,000 in your account, in addition to being 25 years old, before cover may be automatically provided.
If your balance is less than $6,000 when you join:
Even if you’re 25, or older, when you join a super fund for the first time from 1 April 2020, you’ll need to have at least $6,000 in your account before insurance cover may be automatically provided.
If you have an existing super account before 1 April 2020:
If you’re an existing super fund member and have an account balance that doesn’t reach $6,000 at least once at some point between 1 November 2019 and 31 March 2020, your insurance coverage may be switched off on 1 April 2020.
If your super account hasn’t had contributions in the last 16 months:
Since 1 July 2019, any super account which hasn’t received any contributions for 16 months is considered ‘inactive’. As a result, the cover will be switched off every time this happens, unless you’ve told your fund you want to keep it in place.
Of course, you can contact your super fund if you would like for your cover to be reinstated once it is switched off (subject to relevant reinstatement and eligibility criteria) or to have cover remain in place.
Like all financial products, there are things you should think about before deciding whether this type of cover is right for you. If you have any questions about the insurance you have in place or what your options are, please get in touch with your super fund or speak with us by contacting (02)9188 1547 or email email@example.com