Insurance provided by superannuation funds generally falls into three categories of cover:
Death (may also be called life) – guarantees payment to beneficiaries in the event of your death
Disability – guarantees an income in the event of being unable to work through permanent disability
Income protection – provides an income during a period when you are not working, due to temporary unemployment or disability.
Benefits of insurance through your superannuation fund
Nobody knows what life holds around the corner, and taking out insurance to protect yourself can be a prudent move. Taking insurance through your superannuation fund is worth doing for a couple of reasons:
- The premiums are taken directly out of your superannuation fund, guaranteeing that they will be paid.
- As the premiums come out of your fund, you don’t have to work them into your monthly budgeting.
- Superannuation funds have bulk purchasing power, and these insurance policies can be very competitively priced.
- Fund members in a lot of cases are guarantees acceptance by the insurers.
Things to look out for
Obtaining insurance through your superannuation is not without its pitfalls, and there can be drawbacks:
- Complexity – a lot of customers will get confused by the different terms of cover offered by insurers, and not make the best decision.
- No insurance – It is very easy to forget how much your superannuation fund does for you, and this includes insurance; if you move employer and/or fund, you may find that your insurance ceases so you will need to check the terms of your existing fund when considering a move.
- Underinsurance – Not all superannuation funds offer all types of cover, and it is not safe to assume that the cover offered is appropriate for your needs. Before proceeding, check the terms of the insurance provide by your fund, as you may want to find additional cover independently.
- Overinsurance – Similarly, you may opt for the insurances offered by the new fund and, if you don’t remember to cancel your previous policies, find yourself paying for more than one policy.
- Reduced fund – Payment of insurance premiums will reduce the amount accumulating in your fund; you may want to consider the implications when taking this option.
Keeping on top of things
As your life changes, your need for insurance will change with it; as an example, the needs of a married man with children are very different to those of a single person with no dependents. Your insurance should be reviewed every year, or following a life changing event such as marriage or a birth, to make sure that you are protected as well as you want to be.
Everybody has their own, individual insurance requirements, so it is not possible here to recommend whether you should take cover through your superannuation fund. A sound option is always to engage an independent financial advisor, who can review your circumstances and finances, and then provide qualified advice to you.