Life is unpredictable. Unexpected events can have significant financial consequences for both you and your family. This is why insurance is such an important thing to consider. The chances are high that you are already insured. Most superannuation funds automatically sign their clients into insurance policies, with as many as 10 million working Australians having insurance through their superannuation funds.

When deciding which insurance policy works best for you, you should consider important things like a family dependant, debts you may have, and your current lifestyle. Insuring inside your super fund or with individual retail insurers via your super offers a range of benefits and disadvantages and should be carefully considered.

What types of insurance do superannuation funds offer?

There are three kinds of insurance policies offered through your super funds:

• Life (or death) insurance: Beneficiaries receive a lump sum payment if you die.
• Income protection: In case of temporary illness or disability, this ensures you receive income over a specified period of time.
• Total and permanent disability (TPD) insurance: if you are unable to work again due to a serious disability, you may receive a lump sum payment.

There are only a few reasons why you may not automatically have insurance coverage through your superannuation. This can be because:

• You are under 25 (unless working in a dangerous job or made a voluntary choice to opt-out of insurance coverage).
• You have less than $6,000 in your superannuation account or your account was inactive and your insurance was cancelled.

Once these thresholds have been met, your superannuation account will automatically apply or offer you insurance coverage. You can check if you have insurance through your super account, your annual superannuation statement, or by contacting your superannuation fund directly.

Why not insure through your superannuation?

There are benefits to funding your insurance via your superannuation, such as:

• Superannuation funds may have lower premiums because of their access to group policies, making them cost-efficient.
• Contributions to your super fund are taxed at a lower threshold of 15%, meaning your paying for insurance with pre-tax or tax efficient super assets.
• Paying insurance premiums through your superannuation means better cash flow management and no out-of-pocket expenses from your disposable income.
• Default insurance policies almost always come with automatic acceptance, so there is rarely ever a need to get a medical check or answer health questions to secure coverage; this can be advantageous to some clients.

Default insurance cover via superannuation.

Though these benefits may seem good to most people, and incredibly convenient, there are a much longer list of disadvantages to insuring inside your super fund:

• Lack of customisation for default insurance benefits: There is much less customisation for your default insurance coverage because the policies are generalised to suit a variety of people. This means that more specialised retail insurance coverage that might benefit you more is unavailable to you.
• Default Insurance premiums aren’t always cheaper: While some default super fund insurance policies might be less expensive, there may be things that affect your premiums that are outside of your control. This is often because super funds have bulk rates through their insurers, or there is an increase in the number of claims being lodged. For example, young members and non-smokers end up with steeper premiums because of the increase in claims from smokers and elderly people.
• Life insurance benefits expire quicker inside super funds: Generally, default Life insurance policies within your super reduce automatically as you get older and expire once you reach the age of 65-70. In comparison, retail cover can continue to age 99.

Why You Should Insure with Retail Insurance

• Retail insurance can be funded from your Super also: As with default insurance any new retail insurance can be funded from your current super policy. There is no requirement to change super funds. The premiums are funded as an annual rollover from your super to your insurance policy.
• More coverage options for flexibility and customisation: When insuring with a retail insurance provider, your policies become much more customisable. With individual insurance policies can come additional coverages like trauma cover, reduced waiting period for benefits payments, and Own occupation disability cover.
• Retail insurance policies are renewable: Default insurance contract terms are constantly renegotiated between the insurer and the superannuation provider, which can reduce your benefits. In comparison, retail insurers will never downgrade your benefits once your policy is in place and you have an enforceable contract in place between you and the retail insurer. For example, while your default insurance in your super fund might reduce your insurance benefits as you age, your retail insurance policy will always remain the same until you request to reduce or cancel your cover.

Insure With Morgan Insurance Brokers

If you are thinking of moving away from your super fund default insurance provider, we can help.

At Morgan Insurance Brokers, we know insurance like the back of our hands. After a free, no-strings consultation, we work with you to create the best insurance coverage for your situation and lifestyle.

Contact us today and start your insurance journey the right way!