How the changes in superannuation can affect Australians
On 1 July 2019, changes to superannuation came into effect by the Australian Government. The changes were introduced to make sure superannuation account balances were not being excessively eroded by fees including life insurance premiums.
The changes are part of the Government’s ‘Protecting Your Super’ package and it is expected to affect more than three million Australian’s according to the Association of Superannuation Funds of Australia (ASFA)1.
If you or your employer have made regular contributions to your superannuation fund over the past 16 months, this more than likely has no impact to you and the life insurance cover you have within your fund. However, if you have not been making regular contributions – you may have been on maternity or extended leave from work, or perhaps you or your employer have not made regular contributions - then it’s possible you’re going to be affected.
Don't be left vulnerable
If you haven’t received communication from your superannuation fund you should contact them to enquire about the status of your related life insurance cover. You may have lost any life insurance cover previously held, and if so, you can speak to them about possible reinstatement. You may need to supply your medical history and make further contributions.
Don’t be left vulnerable, call your superannuation fund today and find out more about your cover. If something were to happen, you don’t want the nasty surprise of relying on life insurance, TPD or Income Protection that you thought you had – but was actually cancelled on 1 July 2019.
Before the changes in super were even announced, Australia already had an underinsurance issue, which could be news to many. You see, Australia is reported to be one of the most underinsured nations in the developed world2, with 95% of Australians underinsured, despite having cover in their superannuation3.
For many Australians who make regular contributions to their super and rely on the insurance within it, they might not be aware that the cover they have could be inadequate in terms of what is needed, should something unexpected happen like a serious illness or even death.
Underinsured cover in superannuation
According to ATO data from 2018, over 15.6 million Australians had a super fund account and 39% of these people had more than one super account5. Insurance in your superannuation can be confusing, especially if you have multiple super funds. So, here are some points to be made aware of, courtesy of ASIC’s Money Smart website6:
- If you change super funds, have an extended absence from your employer, your employer’s super contributions stop or your account balance drops below a certain amount, your cover may cease, and you could end up with no insurance. Be sure to always read any information sent to you from your super fund.
- Critical illness or trauma cover is not usually available through superannuation, with super funds unable to offer trauma cover to new members since mid-20147. This type of cover can provide you with essential funds in the event you fall seriously ill.
- Did you know, you may only be able to claim on one income protection insurance policy? This could be handy to know if you have multiple super funds and are paying premiums for income protection on those accounts.
- Cover in super is not necessarily tailored to your circumstances and exclusions may apply. It’s always a good idea to check your Product Disclosure Statement (PDS) to find out more about your cover. It’s also important to be realistic about how much cover you need and consider factors like, how much debt you have, how much your family will need to maintain their lifestyle both now and, in the future, as well as what conditions are covered (or not covered) by the policies you’re considering.
- Super funds can be slower to pay than other insurance companies. There can be delays in receiving benefits as the insurer pays the benefit to the fund first, who will then distribute to you or your beneficiaries.
- The cost of insurance premiums is deducted from your super balance, reducing the money you will have available for your retirement.
- If you want to increase your cover, a medical exam may be required, and this could become costly – further taking money from your retirement fund.
You can read more about superannuation and what you should be aware of on ASIC’s Money Smart website
Planning for the unexpected is a necessity in life
ALI Group know things happen in life, which we don’t always plan for. As the leader in protection for Australian home and property buyers, we never want to see our customers lose what they’ve worked so hard for, their home.
Having a back-up plan in place can help mitigate the risks when taking out a large debt or mortgage.
your mortgage broker today about My Protection Plan. It’s how your mortgage broker prepares you for life’s unexpected events.
1. Time to Check website [accessed at: https://vimeo.com/340568959]
2. Lifewise [accessed at: http://www.lifewise.org.au/facts-research]
3. Dynamic business, [Accessed May 2019, at: https://www.dynamicbusiness.com.au/small-business-resources/most-australians-are-underinsured-are-you-one-of-them.html]
5. Australian Taxation Office [accessed at: https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Super-statistics/Super-accounts-data/Multiple-super-accounts-data/]
6. ASIC, Money Smart website [accessed at: https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/insurance-through-super]
7. ASIC, Money Smart [accessed at: https://www.moneysmart.gov.au/insurance/life-insurance/trauma-cover]
About Emma Flanagan
Emma is the Senior Marketing and Communications executive at ALI Group. After completing a Bachelor of Communication with a Major in Journalism, Emma spent a couple of years living, travelling and working abroad before making her way home to Australia. Now, with firm roots back in her home town of the Central Coast in NSW, her and her husband just bought their very first home with the help of their mortgage broker. Now, Emma is here to help FHBs just like her by providing informative and educational content and to keep them abreast of what’s what when it comes to buying, refinancing and protecting themselves and their family from financial hardship.
My Protection Plan is issued by Hannover Life Re of Australasia Ltd ABN 37 062 395 484. It is distributed by Australian Life Insurance Distribution Pty Ltd ABN 31 103 157 811 AFSL 226403 (ALI). ALI receives commission for each policy sold. Any advice provided is of a general nature only and does not take into consideration your objectives, financial situation or needs. You should consider the Product Disclosure Statement
when deciding if this product is appropriate for you.