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What sort of insurance do I have through my super?

Q. “On my recent superannuation account statement I noticed a charge for insurance. What sort of insurance would I have through super?” Sarah

Answer

Thanks for your question Sarah. It’s quite common for people to have insurance as part of their super and not be aware of it.

If you have had an employer open a super account for you to pay your superannuation guarantee contributions into, then you may have both life insurance and disability insurance as part of your account. If you’re lucky, you may also have income protection insurance as well.

There are two main types of insurance you can have through super: insurance that helps you and insurance that helps others.

Insurance that helps you:

  • The first type is total and permanent disability (or TPD) insurance which, as the name suggests, covers you when you’re in a pretty bad way. This is generally paid as a lump sum and can be very useful for ongoing medical bills, to clear debts and provide for any large expenses that you may need to meet your day-to-day living needs.
  • Income protection is the second type and is the most claimed insurance. It can cover up to 75% of your income on an ongoing basis should you be unable to work due to an accident or illness.  The policy will have a waiting period (time you wait until the policy starts to payout), a benefit period (how long it pays you for) and a benefit amount (the amount per month that you would be paid), and you can choose what’s right for your circumstances.

Insurance that helps others:
Life insurance is generally taken out to ensure that your dependants are able to pay living costs or clear debts in the event of your death. This provides great peace of mind knowing that you’re leaving your loved ones with financial security.

Why have insurance in your super fund?
The best part of insurance through super is that you don’t have to pay for it out of your own pocket. It’s deducted straight from your super account and is generally cheaper than insurance you’d arrange yourself as you receive a group discount.

Useful tip
If you have multiple life or TPD insurance policies, you may be able to claim multiple benefits. However, there is little point having more than one income protection policy as you can only ever claim up to 75% of your salary. That means that if you have multiple super funds, you may be paying for insurance you either don’t need or will never be able to claim on.

If in doubt over what insurances you need, it’s best to speak with a financial adviser.

All the best!

Author: Katrina McPhee

Q. “On my recent superannuation account statement I noticed a charge for insurance. What sort of insurance would I have through super?” Sarah

Answer

Thanks for your question Sarah. It’s quite common for people to have insurance as part of their super and not be aware of it.

If you have had an employer open a super account for you to pay your superannuation guarantee contributions into, then you may have both life insurance and disability insurance as part of your account. If you’re lucky, you may also have income protection insurance as well.

There are two main types of insurance you can have through super: insurance that helps you and insurance that helps others.

Insurance that helps you:

  • The first type is total and permanent disability (or TPD) insurance which, as the name suggests, covers you when you’re in a pretty bad way. This is generally paid as a lump sum and can be very useful for ongoing medical bills, to clear debts and provide for any large expenses that you may need to meet your day-to-day living needs.
  • Income protection is the second type and is the most claimed insurance. It can cover up to 75% of your income on an ongoing basis should you be unable to work due to an accident or illness.  The policy will have a waiting period (time you wait until the policy starts to payout), a benefit period (how long it pays you for) and a benefit amount (the amount per month that you would be paid), and you can choose what’s right for your circumstances.

Insurance that helps others:
Life insurance is generally taken out to ensure that your dependants are able to pay living costs or clear debts in the event of your death. This provides great peace of mind knowing that you’re leaving your loved ones with financial security.

Why have insurance in your super fund?
The best part of insurance through super is that you don’t have to pay for it out of your own pocket. It’s deducted straight from your super account and is generally cheaper than insurance you’d arrange yourself as you receive a group discount.

Useful tip
If you have multiple life or TPD insurance policies, you may be able to claim multiple benefits. However, there is little point having more than one income protection policy as you can only ever claim up to 75% of your salary. That means that if you have multiple super funds, you may be paying for insurance you either don’t need or will never be able to claim on.

If in doubt over what insurances you need, it’s best to speak with a financial adviser.

All the best!

Author: Katrina McPhee