Tags: Financial Advice. Super annuation insurance. Finance. Money. Bribie Island. Brisbane
This is the first of a series of articles on super. For many people super is not something to spend too much time thinking about. They may notice the compulsory employer contributions on their pay slips, receive annual statements of their fund balance from their fund manager and consign them to the bin. In the articles to follow I will detail how a healthy super fund balance and adequate insurance cover through your fund can make life much more comfortable in retirement or if you are unlucky enough to be injured and unable to work. Most super funds offer insurance for their members to cover death, total and permanent disability (TPD) and income protection.
Your employer’s default super fund must offer a minimum level of life insurance depending on your age. Check your annual statement or online account if you have one to see what cover you have. You can usually increase, decrease, or cancel your insurance at any time. Getting your life insurance through super should be cheaper because super funds purchase insurance policies in bulk. The premium payments are deducted from your fund balance so you can maintain cover even when money is tight and you can’t afford to pay premiums from the family budget.
The downside is that the premium payments from your fund reduce your fund balance leaving you less in retirement unless you top up your fund to cover the cost of insurance. Another potential advantage of obtaining cover through your super is that some funds automatically accept you for cover without requiring a health check You need to be aware that super fund insurance cover is not portable.
If you move to a different super fund or your employer’s super contributions stop, your cover may end without notice. Also life insurance coverage through super ends when you reach a certain age (usually 65 or 70) whereas policies outside of super may cover you for longer. To ensure that when you die the insurance payout goes to the person of your choice you need to make a binding beneficiary nomination otherwise the super fund trustees will decide who gets the benefits.
Your fund will provide the appropriate paperwork for you to make a binding nomination. Before switching or consolidating super funds, make sure you can get the cover you want, in your chosen fund. Ask the fund if you can transfer your current level of cover before you roll your super over. Be particularly careful if you have a pre-existing medical condition or are aged 60 or over.
If you are considering accessing your super under hardship, compassionate or terminal illness grounds make sure you leave sufficient funds in your account to cover premium payments. I had a terminally ill client who drew down his super balance and closed his account in order to complete a renovation on his house. He was not aware that his super included a $70,000 death cover that was lost when he closed the account. He died a few months later.
If he had left $1000 in his fund to cover the insurance premium the $70,000 payout would have made a big difference to his wife. So it’s well worth knowing what insurance cover you have in your super and increasing the cover if it is inadequate. Also make sure that you take insurance into account when consolidating or drawing down your super account. Check out moneysmart.gov.au for more detailed information Peter Dallimore can be contacted via email at firstname.lastname@example.org or you can make an appointment to see him by calling 3408 8440.
The Financial Counselling service is free. Other free Neighbourhood Centre services include family counselling and courses for parenting, anger management, personal empowerment for women and depression and anxiety courses. A small Emergency Relief Program, a Debt Relief Service and Neighbourhood Harvest (free food once a week) are also provided. In addition the Centre hosts outreach services including Centrelink, Job Search, hearing services and supports some great initiatives including Tax Help and Broadband for seniors. A small onsite Bargain Shop has super low prices. The Neighbourhood Centre is located at 9 Verdoni St Bellara.