When it comes to securing our financial future, many of us rely on the default income protection insurance provided by our superannuation funds. It’s a safety net that’s often out of sight, out of mind. But is this default option really serving your best interests, or is it just a basic cover that’s barely scratching the surface of your needs?

The Reality of Default Coverage

Default income protection insurance in superannuation funds is designed to be a one-size-fits-all solution. It’s basic, generic, and often limited in its coverage. For many policyholders, this means that the insurance may not fully align with their income, lifestyle, and financial obligations. In the event of illness or injury, you might find yourself underinsured, facing financial strain when you can least afford it.

The Pitfalls of ‘Set and Forget’

It’s easy to adopt a ‘set and forget’ mentality with superannuation. After all, it’s something that’s taken care of by your employer, right? Wrong. This passive approach can lead to unpleasant surprises. The default cover often provides only a fraction of your actual income, and benefit periods are typically much shorter than what you might need. For example, pre-existing conditions and specific exclusions can leave you vulnerable.

The Underwriting Difference: Pre-Claim vs. Post-Claim

One of the most significant drawbacks of default income protection insurance through superannuation is the timing of the underwriting process. With default policies, underwriting—a detailed review of your medical history and lifestyle—occurs at the time of claim. This means that when you’re most in need of support, you may be subjected to a rigorous and invasive medical examination. Worse still, the insurer could decline your claim based on findings during this late-stage underwriting.

Why is this problematic?

Because it introduces uncertainty and stress at a time when you should be focused on recovery. It’s like having a safety net with holes that only become apparent when you fall.

The Assurance of Upfront Underwriting

Contrast this with the approach taken by specialised insurance advisors. When you apply for income protection insurance through a trusted advisor, the underwriting process is completed upfront. Every aspect of your health and lifestyle is assessed before the policy is in place, ensuring that coverage terms are clear and agreed upon from the start.

What does this mean for you?

It means that your policy is a solid contract, not just a promise. It’s an agreement that stands firm when you need it, without any nasty surprises. You can rest easy knowing that the terms of your coverage won’t suddenly change when it’s time to make a claim.

The Value of an Advisor

This is where the expertise of a trusted advisor comes into play. They can compare different policies, and recommend coverage that truly matches your needs. They can help you navigate the complex terms and conditions, ensuring that you understand what you’re covered for—and what you’re not.

Making an Informed Decision

Reviewing your income protection insurance isn’t just about finding the cheapest option. It’s about making an informed decision that balances cost with comprehensiveness. A trusted advisor can provide clarity on critical aspects such as waiting periods, benefit periods, and the definition of disability used in the policy.

The Bottom Line

Your income is your most valuable asset, and protecting it requires more than just a basic, default insurance plan. By engaging with a trusted advisor to review and compare your options, you can secure a tailored solution that provides peace of mind and financial security when you need it most.