Will you automatically lose your insurance benefits on July 1, 2019?
June 17, 2019
Many Australians could unknowingly lose life insurance benefits on July 1 if they hold them in a super fund that hasn’t received contributions in 16 months.
The change is part of the ‘Protecting your Superannuation Package’ legislation which is designed to help super fund members by improving superannuation balances and tackling duplicate or unnecessary default cover.
This means many people with dormant funds that haven’t received contributions for 16 months or more may be left uninsured or have inadequate insurance after July 1.
However, superannuation fund members with dormant funds can rectify the situation by making a contribution or simply filling in a form stating you wish to retain the insurance cover.
Super changes under the radar
While super funds have written to their members to advise them of the change, more than 50 per cent of Australians still don’t know about the coming changes, according to data from the Association of Superannuation Funds of Australia (ASFA).
However, super funds have had limited time to communicate these changes to their members due to a short implementation timeframe.
Data shows that more than 85 per cent of Australians hold life insurance (and other insurance benefits) inside their super fund yet one in four people don’t know if they even have insurance in their superannuation fund.
Additionally, a third of people tend not to open letters and emails from their super fund and could potentially lose valuable insurance cover without even knowing it.
Many workers end up with multiple super funds over time, opting for the new employer’s default superannuation fund each time they start a new job.
These funds often have default insurance cover within them, whether the member needs it or not.
How your insurance is affected
The new rules are designed to protect super balances from being eroded through fees for insurance that members may not need.
There are many situations where members will retain an older superannuation fund for the insurance benefits it holds even when they contribute to a different fund.
For example, people who have had their medical status change may not get insurance on such favourable terms if they applied individually and were subject to medical underwriting.
In these cases, the insurance is not only beneficial, but it may well be the main reason for keeping the super fund.
If you are not sure if your superannuation fund will be affected by these changes, then have a look at any recent correspondence from your super fund.
Alternatively, give us a call on (03) 9875 2900 or fill in the form below and have an LDB financial planner help you with your personal insurance needs.