For most people, life insurance provides a safety net against unexpected events. This is particularly the case if you have a mortgage, debts or family who are dependent on you earning an income.
In many cases, life insurance has been automatically offered through superannuation. Although 85 per cent of people hold life insurance this way, a recent survey found one third of them don’t even realise.
Concern that super balances were being eroded through insurance premiums and fees has led the government to introduce Protecting your Superannuation legislation.
As a result, from July 1 this year your insurance cover is to be cancelled if your fund has been inactive for more than 16 months.
It is also proposed (although not yet legislated) that new superannuation fund members who are aged under 25 will no longer be given automatic life insurance cover as they have in the past. Instead, they would be given the opportunity to opt in to cover.
As part of the Protecting your Super changes, inactive funds with balances less than $6000 will see the monies transferred to the Australian Taxation Office. The ATO will then endeavour to amalgamate this money with an active superannuation fund of yours or hold the money for you until it is claimed.
If this happens, investment returns on the money held by the ATO may be significantly less than if you invested through your super.
Don’t wait until you need to make a claim to discover you don’t have any insurance cover after all. If you have any questions about the changes or your insurance needs in general, give us a call.