Often people have limited amounts of life insurance, including some form of life cover within their superannuation, known as ‘group insurance.’
However, Australians remain severely underinsured. We generally don’t even have enough insurance to cover our debts if something happened to render us unable to work.
Isn’t My Insurance Cover Through My Super Enough?
Life insurance through super provides cover for groups of people linked by a common factor such as employees of a company or members of a superannuation fund.
Group insurance can provide the following cover options:
- Death (term life)
- Death and total permanent disablement (TPD)
- Temporary salary continuance (TSC)
Group insurance is a valuable benefit that your employer or superannuation fund provides. However, as with all insurance, it is essential that you work with your adviser to ensure you manage any protection gaps your group insurance may have.
Together you can determine the best strategy to overcome these gaps. This may mean increasing or changing the cover in your group insurance policy or taking out personal insurance.
Items To Consider When Taking Out Group Insurance:
- Is the sum insured enough? Group insurance is generally based on your salary and not on how many financial dependants you have, or your debt levels.
- Is the waiting period and benefit period on your salary continuance policy suitable?
- Do you have a need for trauma insurance?
- Does your policy have a continuation option that allows you to keep your insurance if you leave your employer?
- Do you require any of the additional benefits a personal insurance policy can provide?
- These may include rehabilitation benefits for income protection or funeral advancement benefits for term life insurance.
- Does the design of your plan compliment your intentions in your will? Beneficiary payments under super are taxed at different rates depending on the category your dependants will fall into.
“It Won’t Happen To Me”
- Often the term life and TPD sums insured under a group scheme are known as ‘reducing contract,’ meaning the cover amount reduces as you get older.
- Life insurance policies within superannuation represent 20% of the actual cover required by these policy holders (very low).
- Life insurance policies with super are generally not rated and only have one premium options which is stepped (increases as you get older – eventually most people won’t be able to afford it when they actually need it).