You might have been wondering … why do I have insurance with my Superannuation?
Do I really need it? What am I covered for? You may not even be aware you have insurance in your super fund.
We caught up with David Aitken from Coastsure Insurance to get some answers to the questions that we’ve been wondering, check them out below!
Why is insurance such an important side to Super?
Your superannuation is designed to provide you with income to either replace or supplement the age pension. Unfortunately for some people life doesn’t always go to plan. By having an appropriate insurance plan in place we can then cope with some of life’s setbacks and hopefully still manage to maintain a level of financial independence.
Who should have insurance?
Anyone with a job really! Once we lose the ability to earn money, be it via a job or from investments we become completely dependent on others, including the Australian Government. Again, it’s all about maintaining your own independence – do you want to live your life with your hand out and hoping, or would you rather know that you have your bases covered?
What does it typically cover?
Life insurance covers death, total and permanent disablement (called TPD), trauma (or critical illness such as heart attacks, cancer, stroke etc.) and serious illness and/or injury.
Should cover change as you get older?
It depends – there is no one size fits all solution when it comes to life insurance. Anecdotally you would think that as you get older and wealthier the need for life insurance dissipates, but then it may be that you need to start considering getting cover in place for your children. What if you were just about to retire and something happened to one of your children – as a parent you will generally do anything to keep your children safe, but the cost of this could be the happy retirement you have been working hard for all of your life. So whilst your own cover needs may be reduced for you, you may have to consider getting your adult children covered if they aren’t already.
Is it expensive?
It can be, yes. We don’t tend to get insurance until we think we need it, like when we buy a house or start a family. But if we actually took the time to sort out both of our life insurance and superannuation from the start we can control the cost of life insurance premiums by using what are called level premiums. Level premiums cost more initially but then they flatten out over time. This gives people more options with their savings and retirement planning.
What kind of questions should I ask of my insurance provider?
What is your claims history like? What conditions do you have? Will I have to jump through hoops at claim time? How often do you update your product to keep it in line with both personal and market expectations? Do you have flexible premium options?
Are there any things to watch out for? Red flags?
Absolutely! If it’s too easy to put on, then it is very likely to be very hard to claim on. If people are saying “cheap” premiums that’s an immediate red flag – there is a difference between getting something cheap or getting good value. Quite surprisingly, life insurance offered through a financial adviser (generally termed retail advised life insurance) generally offers the better value, add to the fact that you have an experienced adviser should you need to make a claim. If we consider AISC’s report on the life insurance industry, it was found that 93% of retail advised claims were paid – now that’s value for money.
Well there you have it folks, thanks David! And if you have any more questions relating to your insurance, don’t hesitate to contact David on (07) 5502 2326.
Stay protected everyone!
The Super Equity Team
General Advice Warning: “Any advice given has been provided without taking into account your objectives, financial situation or needs. You should consider whether the advice is appropriate in light of your objectives, financial situation and needs. Please read the Product Disclosure Statement before making a decision to acquire the product.”
David Aitken is an Authorised Representative of Ausure Pty Ltd ABN 94 096 971 854 AFSL 238433