Are You Aware of the Upcoming Life Insurance Changes?
If there’s one important area we can be guilty of overlooking, even avoiding, more than our superannuation and that’s life insurance.
And when that life cover is included within your super it’s easy to naively assume both the payouts will be sufficient and premiums good value.
With luck and judgement that might be the case but the costs of life cover are going up, we are all getting older and there are broader changes in the system.
So greater certainty around life insurance, which includes death cover, total and permanent disability cover and income protection, is more than just desirable. It’s necessary.
The current reforms taking place around protecting your super, as discussed in last week’s blog, are about ensuring premiums do not unnecessarily erode balances on multiple and inactive accounts.
As a result, there’s a chance your life cover, which you pay for within your super, could see the premiums go up, the pay outs go down or both.
The changes come into effect on July 1 which is a good prompt to see if your life cover is going to be affected and to check out other super fund’s offers.
If you’re confused as to if you even have such cover you are not alone. Surveys suggest one fifth of respondents don’t know and even more are unsure as to the cost.
It’s easy to check direct with your fund or look at your latest statement. Like anything else life cover through super has its pros and cons.
You can also buy life cover directly such as through the Fifty Up Club or via financial advisers. Again check to see what suits you best.
Via super cover is bought in bulk so can be cheaper, you can easily adjust the level of cover and you may not require a health check.
But the default levels, that’s to say if you haven’t specified what cover you want, can be pretty low, the terms and conditions may be more restrictive and the premiums do reduce your super balance.
While it’s possible to compare the monthly cost of life cover inside super as against standalone policies you do need to factor in the effect of premium costs on your super balance.
According to the comparison site Finder the difference in your balance over twenty years in an industry fund can vary from around $10,000 to $40,000.
So the first step should be work out if you need or have life cover, if it suits your needs and how much it is costing you.
Your requirements will in part be dictated by your age, your liabilities, your dependents and a number of other factors.
It’s important to get it right and you may decide it’s time to switch your super or your life cover or both to find the value and cover you need.
To get more information on how insurance works though your super the government’s Moneysmart website is a good place to start.
Consumer group CHOICE also have some useful tips around using the various tools and sites to compare different super funds and how to switch.
Any advice contained in this article is general in nature and does not take into account your particular objectives, personal circumstances or needs. If in doubt about your own situation you should seek appropriate advice.