In Australia, many families do not have adequate levels of insurance. It’s often overlooked, but life insurance can be more important than taking out car or home insurance cover.
Life insurance includes three different types of cover. There’s death, total and permanent disability cover (TPD) and income protection.
If you’re a member of Australian Ethical Super it’s likely that you have death and TPD cover by default. As a super fund that offers a MySuper product we’re required by law to provide this default insurance to you. However, changes to the law could soon end default super for new members who are under 25 or have an account balance below $6,000. The important thing to remember is that you always have the option to opt out of insurance within super.
One of the major advantages of holding insurance through your super fund is that it can be more cost-effective than paying your insurance premiums outside of super. This is because super fund providers can group together all the members in their fund and negotiate lower premiums with the insurer (in our case, MetLife) through a group policy.
Another advantage of group insurance through your super fund is that you don’t need to provide extra information such as your previous health details (unless you want to make changes). However, most policies need you to be in full or part time work, or at least be capable of working.
Paying for your insurance through your super fund can also be more convenient because your premiums are paid directly from your super account. The flip side is that paying these premiums will, by definition, reduce your final retirement balance. In fact, there are concerns within the government that default insurance arrangements are negatively affecting some super members. For example, some Australians have multiple super accounts which means they could be unintentionally paying multiple insurance premiums (if you have multiple super accounts, check out tip number 4 below).
Recent changes to the law are attempting to address these concerns. Under the new rules, super members who are deemed to have been inactive for 16 months are having their default insurance ‘turned off’. This begins on 1 July 2019 in accordance with the government’s Protecting Your Super package. This means that if you haven’t made a contribution or rollover to your Australian Ethical Super account for more than 16 months your insurance could be cancelled. But don’t panic! If you want to make sure your insurance remains in place, you can still opt in here to reinstate your cover. You can read more about that here.
There’s more information about what ‘default cover’ means on page 5 of our Insurance Guide, as well as some useful definitions on page 18 – or you can call us on 1300 134 337.
What is a suitable level of cover?
When you think about how much life insurance cover you should have there are a few things to consider, such as your existing debts (like a mortgage), how much you already have invested in super, your financial position, your age and your occupation.
You also need to think about your family’s lifestyle and how much money they might need if you were to die or become permanently disabled (and unable to work). This includes things like regular monthly outgoings and other expenses such as medical expenses, holidays or school fees.
Simple tips to help make sure you have the right level of cover:
- Find out your current level of cover. For Australian Ethical members this is easy – go online (australianethical.com.au/client-login) or call us on 1300 134 337.
- Your default cover may not be enough – use a calculator like the one at MoneySmart, to help you with those expense details you should factor in. If you want to increase your cover, take a look at our Insurance Guide which explains different types of cover or apply for additional cover. You can apply electronically in the Manage my insurance section of your account or by using the insurance variation form.
- Let us know about big life events. If you get married, have children or take our a mortgage to buy your home your insurance needs might change. You’ll need to apply within 60 days of the big life event, or within 30 days of your member statement after the event (whichever occurs later).
- If you have multiple super accounts, you might want to consolidate your super and insurance with one provider. Just remember that different insurance policies have different rules. So before switching, check that you can transfer to the same level of cover that you’re currently on to make sure you don’t lose insurance cover that you might actually need. Australian Ethical is only a phone call away if you want more information.
It’s worth regularly reviewing your cover to ensure that if something were to happen to you, your family will have enough cover in place. It might even be worth checking in with a financial adviser.
Don’t forget that as an Australian Ethical member, you can apply to increase, reduce or cancel your cover any time. We want you to have the right level of insurance for your needs.
How can I change my level of cover with Australian Ethical?
If you want to change your current level of cover, you can:
- Apply online in the ‘Manage my insurance’ section of your online account.
- Complete the Insurance Variation Form.
- Call us on 1300 134 337 if you want to find out more.
Insurance equals peace of mind
The right level and type of life insurance can give you peace of mind. If you meet the requirements of your policy, it might provide you or your family with a lump sum or ongoing payments if the worst were to happen. Having the right level of cover is all about trying to minimise any disruption to your family finances at an already stressful time.
Please note that Australian Ethical can only pay a claim for insurance where the Insurer has accepted the claim and paid the insured benefit to the Fund and you satisfy a condition of release for the payment of the benefits from the Fund. For information on what is a condition of release, please visit the ATO’s website. This information is of a general nature and is not intended to provide you with financial advice or take into account your personal objectives, financial situation or needs. Before acting on the information, consider its appropriateness to your circumstances and read the product disclosure statement (PDS) and Insurance Guide, available at australianethical.com.au/super/pds. You may wish to seek independent financial advice from a licensed or authorised financial adviser before making an investment decision. Interests in the Australian Ethical Retail Superannuation Fund (ABN 49 633 667 743, USI AET0100AU) are offered by Australian Ethical Investment Limited (ABN 47 003 188 930, AFSL 229949) and issued by the Trustee of the Fund, Australian Ethical Superannuation Pty Limited (ABN 43 079 259 733, RSE L0001441).