When you see Life Insurance ads like this on TV
You might find yourself thinking, hang on is that women about to give birth to a pillow?
But also Maybe I should get life insurance?.
When what we should really be thinking is Do I already have life insurance?
Cos an estimated 70% of Australian workers already have life insurance
through our superannuation.
When you join an Australian super fund, by default you get
life insurance, disability or “TPD" insurance.
And sometimes even income protection insurance
which means, unless you specifically opted out you’re probably already covered
by what’s known as “group insurance”.
Ahhh!
So if something happens to me, I’ve already got insurance to provide for my pillow?
Yep!
But insurance through super isn’t free.
So it's important to find out whether you have it and
I like the green.
Get out!
Cos insurance premiums can really eat into your superannuation
before you retire.
Before I retire there's just a few things I’d like to say as I permanently
Checkout!
A 30 year old with default life, disability and income protection insurance through super
could be paying anywhere from two to twenty dollars a week
And the cover they get for it can vary by hundreds of thousands of dollars.
A KPMG review found that by the time you retire, on average default group insurance premiums
reduce super balances of men by 5% and women by 7%.
And that could put a real dampener on your retirement plans
So I bought us a brand new c-
Campervan?!
Camel-van!
It does six miles to the carrot!
The cost of super insurance hits young people, casual workers and low income-earners hardest.
They can end up paying more for insurance than they’re putting into their super.
So their balance actually goes backwards!
Not only that, but if you’re a blue collar worker, you’re deemed to be at greater risk at work,
so your premiums are higher.
Hello Cobber!
Take me to real Australia.
A 21 year old blue collar worker with default group insurance today could have
$250 grand less in their super by age 65.
Son of a brriiiick!
Of course, having insurance can be a good thing
But you need to find out how much it's costing you
and whether the group insurance you have is right for your circumstances.
The most common way of paying too much for super insurance is by paying for it twice
or more!
Forty percent of working Australians are in more than one super fund.
This means that unless unless you’ve opted out, you’re paying insurance premiums in
each super fund you’re a member of.
But multiple policies means multiple payouts !
This is the greatest day of my life!
Oww!
Look that is possible
But it’s far more cost effective to just be in one super fund which has the insurance
cover you need.
You generally can’t claim on more than one income protection policy
So my identical income protection policies are about as useful as a hole in the head?
Yep.
Which you also have.
Group insurance through super doesn’t take into account your personal circumstances.
So the default death coverage might be too much for young single people
but not enough if you have a family or a mortgage.
Back at work already?
I didn’t have enough insurance.
Some funds even assume you're in a high-risk occupation or even “default” you as a smoker
unless you tell them otherwise.
So this guy
I broke a nail!
could be paying the same in insurance premiums
as this guy.
I broke a nail.
In 2017, Australian Super signed its public service members up for income protection insurance
which could cost over $80 a month! They only let them know by a form letter:
you know that thing that none of us ever read
Members only had 2 weeks to to opt-out.
Why don’t superfunds just call us up and make sure we’ve got the right insurance?
It's often in their interest for us to have too much insurance
See many super funds are actually related to the companies that they buy the insurance from
which can lead to more expensive insurance products
Come with me
Oww!
To control costs some funds have agreed to terms and conditions that make it harder for
members to claim, especially for disability insurance.
Some policies payout if you’re “unable to perform” your own job
Whereas others make you prove you're unable to perform
“any occupation to which you are reasonably suited”.
Great, do I get my disability payout?
Nope.
The insurer says you are able to work... licking stamps!
But I’m a construction worker!
Who’s reasonably suited to this!
Hey, it could be worse If you were working 15 hours or less when you were injured
you might also need to prove you’re totally unable to do two things from
this bizarre list.
Prove to me you can’t transfer and toilet
Actually don't worry I’ll just tick that second one.
It's harder for people who work less to make a claim even though they pay the same premiums?!
Yep.
Leaves a bad taste in your mouth doesn't it.
I've already got a bad taste in my mouth
If insurance in super sounds like a bit of a mess, that’s cos it is.
But look, that doesn’t mean you should rush to opt out
or run off to buy the retail life insurance you see on TV.
There are costs and benefits to both.
Life and disability insurance through super
is generally cheaper, it’s paid from your pre-tax income, and basic cover is automatic,
so no need for a medical.
But group insurance isn’t tailored to individual needs.
Retail insurance generally costs more and there’s a full medical questionnaire.
But your cover is more tailored, and they do usually include “own job” disability.
So what do we do!?
For many Australians the-
No, I mean, how do we get away from this speech?
and there are just so many happy smiling faces that I can just “A-triple C”
Boo!
Superannuation is still the most cost-effective way of getting life insurance for many people.
If you don’t do anything else call up your super fund and make sure they have you in
the right occupation.
If you work in an office, earn over $100,000
and have a tertiary qualification, you could qualify for higher coverage for
no extra cost!
Finally!
A break for well-paid, university educated office workers.
Ow!
Jeez it happened again!
If you do want to tailor your super insurance use an online calculator to work out how much you need.
Above a certain amount you’ll need to complete a medical questionnaire.
Now, who’s in multiple super funds?
If you don’t know, sign up to my.gov.au and link your account to the ATO.
There you can get a list of all the super funds you’re in and
whether you’re paying insurance in that fund.
Remember, when you move out of a fund you lose the insurance - so before you consolidate
make sure you’re happy with the cover in the fund you’re moving to.
I’d like to end
Hurray!
with some advice on insurance
Ugghh
You’re better off with a single well designed product rather than relying on the
unpredictable fortunes of multiple policies, all of which you pay for.
Finally, something worthwhile.
And there is a way to get group life insurance without eroding your super balance:
all you have to do it make additional, voluntary super contributions that cover the cost of
your insurance.
Voluntary super contributions?!
That’s even more boring than Julian’s speech.
Hey! You know I haven’t left yet.