How much do you know about your super?
Did you know you could actually could have default life insurance cover as part of your superannuation – and that it could be taken away at the beginning of next month?
On 1 July, the government’s ‘Protecting Your Superannuation’ laws will see automatic life insurance cover be removed from members whose accounts have been inactive for 16 months or more.
The aim of the super changes is to prevent costly fees, which bank up over time, eating up balances on inactive accounts.
But for many, superannuation is the only place Australians have access to life insurance, which provides an important safety net for individuals and their families, said Financial Services Council CEO Sally Loane.
“The Protecting Your Super changes will help reduce account erosion through the additional fees and insurance that come along with unintended duplicate accounts,” she said.
“But this is also a timely reminder to check your super and make sure you have the right insurance for your circumstances.”
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However, the insurance industry has raised the alarm on how in the dark Aussies seem to be about the changes.
Less than half of Aussies in a study by the Association of Superannuation Funds of Australia (ASFA) said they knew about the changes coming into effect. One in five said they weren’t totally clear about the changes, and nearly a third said they’d heard of the changes but didn’t know about the details at all.
Most (85 per cent) Australians have life insurance through their superannuation, but only 2 in 3 (67 per cent) surveyed by ASFA believed they did. A third said they were certain they didn’t have that insurance in place.
Check on your super before it’s too late
Every year, more than $500 million in life insurance claims are paid out to Aussies with inactive super accounts, according to a national awareness campaign by AIA Australia, Mercer, and Commonwealth Superannuation Corporation (CSC).
Given that people can be less engaged with their finances, their super and their insurance, life insurance cover embedded in superannuation in a ‘default’ way is a “sustainable system for mass consumer protection” that benefits everyone in society, according to AIA Australia CEO Damien Mu.
“From July, many Australians who previously benefited from the default system will lose access to their life insurance cover if they don’t take action to consider their needs and actively choose to maintain cover.”
The worry is also that people won’t care until it’s too late and find out they’re uninsured in their greatest time of need after a serious and gave event, Mu pointed out.
“We want all Australians to be informed of the changes and able to make the right decision based on their own individual circumstances.”
Echoing Mu’s comments, CSC chief customer officer Peter Jamieson said reducing fee erosion, consolidating accounts and abolishing exit fees were all in the interests of customers.
“But we also want as many customers as possible to be aware of their level of insurance through super, and we certainly don’t want any customer to discover they are uninsured when it is too late.”
On top of that, the Australians who deliberately keep some super savings in an ‘inactive’ account just to keep that default insurance cover will be part of the fall-out if members aren’t aware of the changes, said Mercer Australia CEO Ben Walsh.
What can I do about the incoming superannuation changes?
Check in with your super funds to find out whether you have default insurance cover, whether it’ll disappear in July, and whether it is right for your needs.
“The easiest way to know if you’re affected is to open and read any letters, emails or SMS messages you receive from your super fund, but if you’re not receiving those it’s important you identify the fund and make contact,” said Loane.
How do I check if I have default life insurance cover?
Log into your myGov account, link to the ATO and check for the super accounts you have
Get in touch with your fund if you have any inactive accounts with insurance
To keep insurance cover in your inactive account, get in touch with your super fund.
I want to keep my default life insurance cover. What do I do?
You won’t need to do anything if the cover is part of a super account that is receiving regular contributions.
But if it’s part of an ‘inactive’ account that hasn’t had a contribution in 16 or more months, you’ll have to get in touch with your fund before 1 July 2019 to let them know you want to keep it.
“Talking to your fund over the phone may help you come to a decision about your insurance cover, but your express choice should be made to the fund in writing or by electronic means,” said the timetocheck.com.au website.
“This can involve sending an email, responding to a text message from your fund, or filling in a form on your fund’s website.”
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