Check your insurance in super before 1 July

June 24, 2019 |

On 1 July, significant changes are occurring to insurance provided by superannuation funds. This may impact people’s access to life and total permanent disability (TPD) insurance.

On 1 July, significant changes are occurring to insurance provided by superannuation funds. This may impact people’s access to life and total permanent disability (TPD) insurance.

Consumer Action is alerting community workers because more disadvantaged members of the community are more likely to be affected by the changes. 

 

The changes result from legislation passed in March, designed to protect people’s retirement incomes. Overall, the reforms are positive: unnecessary fees and insurance, particularly where people have multiple accounts, erode super fund balances by more than $2 billion per year. However, people who could benefit from insurance will need to take action if they want to keep it. 

 

 

Key changes are: 

  • Cancellation of insurance: super funds will cancel insurance on accounts that have not received contributions for at least 16 months. Super funds should have informed members before 1 May 2019 if this was to happen. 
  • Inactive account transfers to ATO: accounts with less than $6,000 that are inactive for 16 months will be transferred to the ATO. If you have another active fund, the ATO will merge the funds. If you don’t have another active account, the ATO will keep your super safe. 
  • Fees: there will be no exit fees if you leave your super fund, and there will be a 3% cap on fees for accounts with less than $6,000. 

 

What does this mean for the people I help? 

The insurance changes will impact many people. Consumer Action says people should track down superannuation accounts and speak to their fund. Importantly: 

  • Not everyone needs to retain insurance – for people who already have cover, or are young, healthy and have no dependents, they are less likely to need insurance. 
  • People who have multiple accounts are less likely to lose insurance entirely. This is because they will still have insurance with any active super fund.  
  • People who are not working because of illness, disability, caring obligations, or persistent problems securing employment are more likely to be at risk. Depending upon the wording of the policy, some people may be already excluded for some cover (like TPD) but may still have death cover. 
     

Financial counsellors in remote regions are particularly concerned about the impact of the reforms on remote Aboriginal and Torres Strait Islander communities and want to ensure these communities get the information easily and have support to act on it before 1 July.  

 

The people impacted most by these changes may be less likely to receive or read the notifications from super funds or take the action needed to protect their insurance rights.   

 

How can I help people impacted by this? 

We urge community workers who have clients that are likely to be affected to encourage them to take action. If they want to continue insurance, they should: 

  • contact their fund and tell them they want to continue the cover,  
  • make a superannuation contribution into the fund (the fund will tell you the minimum contribution required). 

If people want more time to consider their options, they should take the above steps as they can always cancel the insurance later. If insurance cover does lapse, people can apply again through their super fund but may not get the same cover. 

What if my client needs to lodge a life insurance claim? 

If people want to consider lodging a life insurance claim, because they have become disabled, they should do so. As long as insurance cover was active at the time they last worked or became disabled, they may still have a claim and may not need to continue the insurance cover. If they have problems or need advice, they can contact the services listed below.  

What is Consumer Action doing? 

Unfortunately, insurance in superannuation is complex and the notifications from super funds are often not read or hard to understand. Consumer Action is working with other consumer organisations to urge the superannuation industry to improve the way they communicate with members.  

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