Published: 04 October 2019
Author: Kathryn Papanikolaou

Chasing lower super fund fees may threaten your insurance cover

Did you know that switching super funds for lower administrative fees may affect the level of income insurance and benefits you would be entitled to should you become ill or disabled?

Here are some serious questions you have to ask before switching funds.

Superannuation funds have been in the media lately, mainly for all the wrong reasons. It has become clear that certain funds have substantially lower administration fees and even still manage to outperform others more expensive funds.

While lower administrative fees are attractive, you should be aware that lower fees may also entail fewer insurance benefits. That’s not to say you shouldn’t swap funds, but you need to do so with your eyes wide open, and be aware of any consequences that may follow from a lower level of cover.

Questions to ask before swapping super funds

Here are some questions to ask before you consider changing funds.

1. Does the Super Fund with lower admin fees offer the same level of insurance benefits you are currently covered for?
2. Is the Total Permanent Disablement (TPD) and Income Protection (IP) cover the same as your previous policy?
3. Will you be paying a higher premium for the same level of insurance cover?
4. Switching super funds may impact a future insurance claim where a pre-existing illness was not disclosed to the new fund. Have you checked with the new fund?

Invest time in investigating best future options

It’s imperative to look at all aspects of a superannuation fund before switching.

Chasing lower administration fees can easily be out-weighed by a possible insurance claim that may be financially life-changing.