The consideration of insurance is super is an important decision for all members – and an important consideration of cost vs benefit.
Insurance are one of those products that helps us sleep at night. By purchasing insurance, we protect ourselves and our families by averting monetary risk at times of financial loss or when if you were to become sick or injured. Now… a number us actually has some sort of insurance in our Super without even knowing! You may not have purchased this product directly, however, by opening a Superannuation account – to receive our Super Guarantee payments – you may have inadvertently set up a Vanilla/Standard Insurance Policy simultaneously.
For those of us, who were savvy enough to notice insurance in our superannuation fund, have you considered whether the product is right for you?
Insurances which have automatically been set up in superannuation, whether it be Life or TPD, are standardised contracts meaning that the insurer has not taken into account your personal circumstances nor does it consider whether this will adequately protect your quality of life and provide support for your loved ones in the event of sickness and injury. This is a problem, given that you a paying for a product, with the misconception that you are “Fully Covered.” However, the biggest RISK of these products is that they may not actually pay you out any benefits at all come claim time!
Mary has just started her new job and her employer has established a default superannuation account with RETAIL-SuperFund which includes their standard Life and TPD Insurance product. Unfortunately, Mary is a smoker and her family has history of heart disease and is diagnosed with high blood pressure. Mary also has two children whom go to private school and a husband working to make ends meet. It has come winter and Mary has tragically suffered a heart attack and has passed away… Looking beyond the grave, Mary thinks her family will be taken care of finically, as she knows that RETAIL-SuperFund included Life and TPD Insurance.
RETAIL-SuperFund regrets that Mary has passed away but have not granted her family the Life Insurance Payout – NOT A CENT.
Standard insurance policies in super generally do not require pre examination of the client’s personal circumstances. As such, insurers assumes and base their cover and payout on a “Healthy” individual condition, which can be construed as a somewhat unrealistic set of conditions. The main issue here, is that RETAIL-Superfund is unaware of Mary’s pre-existing health conditions and would not have insured her or would have charge a higher premium if they had known these issues. Given this, RETAIL-Superfund had no obligation to pay Mary’s life insurance under contract and the finer details of their terms and conditions. Mary has been paying insurance premiums in her Superannuation all those years for nothing!
Getting professional insurance advice will help navigate you around tips and traps of insurance. Insurance is NOT a black and white product and needs to be personalised to your circumstance and updated and reviewed when your circumstances change.
There are various types of insurance which will cover you for certain events and there a wide range of specialised insurers to choose from. Your adviser will be able to tailor a cover for you so that you pay a competitive premium and allocate a cover that will minimise financial risk for you and your family. So get cracking… check up on your Not So Super Insurance today and ensure that you have the right cover for you!
Disclaimer – The content has been prepared by Redwood Wealth Pty Ltd & Redwood Advisory Pty Ltd without taking account of the objectives, financial situation or needs of a particular individual and does not constitute financial product advice. This article should not be considered personal financial advice as it is intended to provide factual information only.
Ivan Filipovic is an authorised representative of First Mutual (AFSL 423710). Redwood Wealth is a Corporate Authorised Representative of First Mutual (1244359)