Your yearly super statement will soon be arriving in the mail and majority of us will likely jump to the area that shows investment returns and check the balance and throw the letter in the bin or put it away to look into later, but don’t ignore the insurance section as you want to ensure you are getting the right insurance through your super fund if this is the only cover that protects you.
There are many great things about superannuation, not just the fact that it helps pay for a good retirement. It can offer financial advantages long before we retire.
Personal insurance is one of these benefits.
Most likely, your super fund does this automatically for you:
- Life insurance which offers a lump sum payment in the event of your death, and
- Total and permanent disability (TPD) insurance, which pays out if a sickness or injury renders you totally and permanently incapacitated and unable to return to work.
- Income protection insurance may also be available through your super fund; however, it is typically an opt-in benefit rather than an automatic one and usually on plans sponsored by your employer
- There are few exceptions, as superfunds are unlikely to provide personal insurance if you are a new member under the age of 25 or if your account balance is less than $6,000. However, you can always request cover by notifying your fund and opting in.
Is the level of cover right for you?
It’s generally comforting to know that your super provides life and TPD insurance.
Also, the insurance premiums stay low as superfunds buy cover in bulk. The drawback is that your fund doesn’t know your specific needs.
Take a look at it this way.
A fund member who is 30 years old might be single, live at home, and not have any debt.
Another person in the same fund might also be 30 years old, but they would be a single mum of two kids with a $500,000 mortgage.
It’s clear that the two fund members need very different kinds of insurance.
Super funds offer default insurance which is usually unitized and based on your age eg. 30 years old-1 unit equals $12,000x 15, but it can’t figure out what kind of insurance each person needs on its own.
It’s up to you to adjust your level of cover so that it’s right for your needs.
Getting the right level of cover
A four-step approach determines your super insurance needs:
- Review your current insurance cover
To find out, you can either go online and look at your member account or call your fund and ask.
- Know how much cover you need
Your super fund might have an insurance needs tool that can help you work out how much coverage you need. Consider your over all debt, living expenses, medical expenses, funeral costs and replacement of income for your family.
- Compare the cover you need to the insurance you have in place
You could be underinsured, if there is a shortfall in your level of cover. This could put your family in a tough financial spot if something bad happened.
- Adjust your level of cover
Get in touch with your fund if you want to go over your personal insurance.
Be aware that your super savings are used to pay your insurance premiums. So, getting more cover can change how much you save in super for retirement.
You can always get extra coverage that isn’t part of your super. But you’ll have to pay for the premiums out of your own pocket, and it might cost more than getting insurance through your super. Alternatively you can link an external insurance product to your superfund so premiums are deducted annually, minimising the impact on investment returns and potentially getting a more comprehensive policy that will also factor in any pre existing medical conditions that you may not be covered for.
It doesn’t have to be hard to get the right amount of insurance through super. If you’re not sure how much coverage you have, call your fund and ask for more if you need it.
We hope that you and your family never have to file a claim. However it’s nice to know that you always have the right amount of protection for your needs.
If the above seems all do hard, we are specialists in this area and can sit down with you to review your current situation and any existing policies, while identifying any gaps or underinsurance in your situation, while recommending the most suitable options and products that work for your budget.
You can call our office on 02 9188 1547 or email admin@rpwealthmanagement.com.au. We offer online appointments or meetings can be held at our office locations in Oran Park or Baulkham Hills/ Norwest Business Park.
If you like this article, you may also like the following by clicking on the link:
https://www.rpwealthmanagement.com.au/tailoring-life-insurance-as-you-age/
https://www.rpwealthmanagement.com.au/do-i-need-life-insurance-if-im-young/
https://www.rpwealthmanagement.com.au/estate-planning-its-more-than-a-will/
https://www.rpwealthmanagement.com.au/life-insurance-for-married-couples/
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