Life Insurance In Super

When you see Life Insurance ads like this on TV You might find yourself thinking, hang on is that women about to give birth to a pillow? But also Maybe I should get life insurance? When what we should really be thinking is Do I already have life insurance? Cos an estimated 70% of Australian workers already have life insurance through our superannuation

When you join an Australian super fund, by default you get life insurance, disability or “TPD" insurance And sometimes even income protection insurance which means, unless you specifically opted out you’re probably already covered by what’s known as “group insurance” Ahhh! So if something happens to me, I’ve already got insurance to provide for my pillow? Yep! But insurance through super isn’t free So it's important to find out whether you have it and I like the green Get out! Cos insurance premiums can really eat into your superannuation before you retire

Before I retire there's just a few things I’d like to say as I permanently Checkout! A 30 year old with default life, disability and income protection insurance through super could be paying anywhere from two to twenty dollars a week And the cover they get for it can vary by hundreds of thousands of dollars A KPMG review found that by the time you retire, on average default group insurance premiums reduce super balances of men by 5% and women by 7% And that could put a real dampener on your retirement plans So I bought us a brand new c- Campervan?! Camel-van! It does six miles to the carrot! The cost of super insurance hits young people, casual workers and low income-earners hardest They can end up paying more for insurance than they’re putting into their super So their balance actually goes backwards! Not only that, but if you’re a blue collar worker, you’re deemed to be at greater risk at work, so your premiums are higher

Hello Cobber! Take me to real Australia A 21 year old blue collar worker with default group insurance today could have $250 grand less in their super by age 65 Son of a brriiiick! Of course, having insurance can be a good thing But you need to find out how much it's costing you and whether the group insurance you have is right for your circumstances The most common way of paying too much for super insurance is by paying for it twice or more! Forty percent of working Australians are in more than one super fund This means that unless unless you’ve opted out, you’re paying insurance premiums in each super fund you’re a member of

But multiple policies means multiple payouts ! This is the greatest day of my life! Oww! Look that is possible But it’s far more cost effective to just be in one super fund which has the insurance cover you need You generally can’t claim on more than one income protection policy So my identical income protection policies are about as useful as a hole in the head? Yep Which you also have Group insurance through super doesn’t take into account your personal circumstances So the default death coverage might be too much for young single people but not enough if you have a family or a mortgage

Back at work already? I didn’t have enough insurance Some funds even assume you're in a high-risk occupation or even “default” you as a smoker unless you tell them otherwise So this guy I broke a nail! could be paying the same in insurance premiums as this guy I broke a nail In 2017, Australian Super signed its public service members up for income protection insurance which could cost over $80 a month! They only let them know by a form letter: you know that thing that none of us ever read Members only had 2 weeks to to opt-out

Why don’t superfunds just call us up and make sure we’ve got the right insurance? It's often in their interest for us to have too much insurance See many super funds are actually related to the companies that they buy the insurance from which can lead to more expensive insurance products Come with me Oww! To control costs some funds have agreed to terms and conditions that make it harder for members to claim, especially for disability insurance Some policies payout if you’re “unable to perform” your own job Whereas others make you prove you're unable to perform “any occupation to which you are reasonably suited” Great, do I get my disability payout? Nope The insurer says you are able to work licking stamps! But I’m a construction worker! Who’s reasonably suited to this! Hey, it could be worse If you were working 15 hours or less when you were injured you might also need to prove you’re totally unable to do two things from this bizarre list Prove to me you can’t transfer and toilet Actually don't worry I’ll just tick that second one It's harder for people who work less to make a claim even though they pay the same premiums?! Yep Leaves a bad taste in your mouth doesn't it

I've already got a bad taste in my mouth If insurance in super sounds like a bit of a mess, that’s cos it is But look, that doesn’t mean you should rush to opt out or run off to buy the retail life insurance you see on TV There are costs and benefits to both Life and disability insurance through super is generally cheaper, it’s paid from your pre-tax income, and basic cover is automatic, so no need for a medical But group insurance isn’t tailored to individual needs

Retail insurance generally costs more and there’s a full medical questionnaire But your cover is more tailored, and they do usually include “own job” disability So what do we do!? For many Australians the- No, I mean, how do we get away from this speech? and there are just so many happy smiling faces that I can just “A-triple C” Boo! Superannuation is still the most cost-effective way of getting life insurance for many people If you don’t do anything else call up your super fund and make sure they have you in the right occupation If you work in an office, earn over $100,000 and have a tertiary qualification, you could qualify for higher coverage for no extra cost! Finally! A break for well-paid, university educated office workers

Ow! Jeez it happened again! If you do want to tailor your super insurance use an online calculator to work out how much you need Above a certain amount you’ll need to complete a medical questionnaire Now, who’s in multiple super funds? If you don’t know, sign up to mygovau and link your account to the ATO

There you can get a list of all the super funds you’re in and whether you’re paying insurance in that fund Remember, when you move out of a fund you lose the insurance – so before you consolidate make sure you’re happy with the cover in the fund you’re moving to I’d like to end Hurray! with some advice on insurance Ugghh You’re better off with a single well designed product rather than relying on the unpredictable fortunes of multiple policies, all of which you pay for Finally, something worthwhile And there is a way to get group life insurance without eroding your super balance: all you have to do it make additional, voluntary super contributions that cover the cost of your insurance

Voluntary super contributions?! That’s even more boring than Julian’s speech Hey! You know I haven’t left yet

Source: Youtube

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