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Are you insured through your super fund?


Kate Wick

By Kate Wick

4 min read

Am I up to speed on the insurance cover provided by superannuation in Australia? That's the question you'll want to ask yourself in light of research commissioned by the Association of Superannuation Funds of Australia (ASFA) in 2014, which revealed Australians are worryingly out of the loop when it comes to this subject. 

"Insurance provided through super plays an important role in helping to protect people from the financial shocks of unexpected events," explained Pauline Vamos, ASFA Chief Executive. 

"However, many people remain in the dark about what type of cover they have and whether it's a good fit for themselves and their family."

More than two-fifths have "poor" knowledge

Over 40 percent of those surveyed were found to have a poor understanding of the insurance within their superannuation, with around 40 per cent also admitting they didn't know how to change or choose their level of cover or type of insurance. 

There was a pronounced gender gap in understanding of this subject, as well as an age gap. Just over one-fifth of generation Y respondents, or those 32 years old and under, reported they had "no understanding at all" of the insurance options available through super. While at least ten percent of all other age groups claimed a "very good understanding" of the topic, only 8.6 percent of Generation Y respondents said the same.  

What is insurance through super?

Australian superannuation offers the ability to secure insurance through your super fund, which has several key benefits.

For one, as fund-holders advance in years, it's not uncommon for them to suffer total and permanent disability or even death, leaving them or their dependents to draw more on their superannuation funds earlier and for longer. According to a 2010 Lifewise/NATSEM Underinsurance report, one in five families will be affected by a parent who either loses the ability to work or dies before retirement age. Securing insurance through superannuation is one way to avoid having to use your hard-earned super funds prematurely. 

In addition to this, you may save money by taking insurance out through your super. Your premiums are automatically deducted from your superannuation fund, which is not only simpler, but may have tax advantages in that it comes from pre-tax income. You also may have a higher chance of being automatically accepted without the requirement of a health check.  However, these benefits will all depend on your particular circumstances – so it is important that your do your research and ask questions.

The types of insurance you can claim

There are typically three main types of insurance offered through super: Life insurance, total and permanent disability cover and income protection insurance. A well-structured combination of these can financially shield you and/or your family if the worst should happen and you are either unable to keep generating an income due to disability, or pass on. 

Remember that, the super fund your employer regularly contributes to may provide a basic level of insurance cover. You should check it out and if you're not happy with the level of cover provided, you can decrease, increase or even dispense with it entirely. The amount and type of insurance you have in super is your choice.

If you have any other queries about your super fund, don't join the 40 per cent of Australians with no clue – get in touch with your super fund and don't be afraid to ask them questions. 

Advice contained in this article is general in nature and not specific to your particular circumstances.  Before making an investment decision you should consider your own financial situation and the relevant Product Disclosure Statement/s.  We also recommend you seek advice about your own particular circumstances from a licensed financial adviser.

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