New Super law could strip you of income protection & disability insurance
New laws introduced yesterday by the Federal Government could see up to 3 million working Australians automatically stripped of their life insurance packaged as part of their superannuation.
The new regulations could also deprive unsuspecting people of their total and permanent disability insurance, and their income protection cover unless they choose to ‘opt-in’ to the protection and communicate this clearly to their fund.
The laws are aimed at clamping down on super funds eroding accounts with low balances by charging high insurance premiums and fees. While this may benefit some fund members, the changes also pose a risk to members who are unaware of the changes and who may need to make a claim against their insurance policy down the track.
The changes are set to impact members whose accounts have been ‘inactive’ over the past 16 months. That is, accounts where no compulsory or voluntary contributions have been made in that period. If affected fund members want to keep their insurance, they need to communicate that to their fund.
Those on parental or sick leave among the most exposed
Those who could be affected include people on extended parental or sick leave, self-employed individuals who don’t make regular contributions to their funds, individuals currently working overseas, or, people who have set up a superannuation account solely for the benefit of having insurance.
Super funds have been communicating with affected fund members via letter and email about the proposed changes to their insurance cover and are warning consumers it is imperative that they read and respond to the notices accordingly.
If you believe these changes could affect you, it is important you get in touch with your fund as soon as possible so that you can make an informed decision about what is right for you.
This particular change comes as part of a much wider reform to the superannuation industry following the landmark Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry which concluded earlier this year.
Many fund members who won’t be affected by the default loss of their insurance cover may still be affected by changes to policy fees and premiums. Super funds have again been communicating with their consumers about these changes via email and letter.
You need to check your Super insurance now
These changes serve as a good reminder for us to check whether the level of insurance cover we have with our fund is right for us and to not be afraid to shop around for the right policy to suit our individual needs.
Insurance cover such as Total Permanent Disability (TPD) and Income Protection (IP) can be accessed if you are no longer able to work due to illness or injury. It can often be crucial in providing financial security to you and your family in difficult times.
If you are no longer able to work due to illness or injury and would like to enquire as to your super benefits, you can contact our dedicated Super Department on 03 9238 7878.