As well as superannuation, most super funds also offer their members some important insurance options. They’re designed to give members peace of mind should something unexpected happen.
The three most common types of insurance in superannuation are:
Often, funds will combine death cover with TPD cover and provide it as default cover as part of your membership, whereas you are usually required to apply for income protection cover.
Buying death, TPD and income protection insurance cover through your super fund is often a lot cheaper than if you were to obtain it as an individual.
Superannuation funds have enormous buying power and can purchase in bulk, which means they can generally negotiate better premiums and pass the savings on to members. What’s more, Industry SuperFunds don’t pay commissions to advisers for selling insurance and can pass this saving on as well.
Most super funds are able to negotiate with their insurer to obtain insurance cover for their members regardless of individual members' current state of health. So even if you’re in poor health you can generally still receive automatic base level cover at premium rates negotiated by your super fund with their insurer.
There’s also no fear of forgetting a payment (potentially leaving you without cover) since funds automatically deduct the premium from your super.
Finally, super fund insurance premiums effectively attract a tax deduction for the fund that should then be passed back to you in the form of lower premiums.
If your superannuation balance doesn’t cover the cost of the insurance premium you can always add extra to your super to offset this cost.
Like any insurance, it’s important to make sure the insurance you have through your super will cover your needs (and/or those of your family) if misfortune strikes. Similarly, you don’t want to be paying for cover you’re not likely to need. That’s why it’s wise to check your cover and make sure it’s adequate and relevant.
When assessing your cover, you should consider the following:
Your most recent superannuation statement should detail the type and extent of any insurance you have with your fund. If you can’t find it or you’re still not sure, just call your fund and they’ll be happy to answer your questions.
Once you’ve worked out your level of insurance cover, check to see if you have any insurance cover elsewhere, and add that into your calculations. You may find that you’re doubling up if two policies cover the same thing. If so, you might want to consider consolidating your insurance – but first, make sure:
And remember, the amount of cover required differs from person to person and is based on various factors including, your age and your life circumstances, the amount of debt you have, if you have any dependants, their age, and of course, how much you’re earning currently.
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