Suzie Brown
Australian life insurer, Integrity Life, is urging Australians to check their life insurance cover inside superannuation before the enforcement of new laws on 1 July 2019.
As part of the Protecting Your Superannuation Package reforms, a superannuation fund member’s life insurance will be cancelled if their superannuation account is inactive, unless they elect to retain the insurance.
According to Suzie Brown, General Manager, Distribution, Integrity Life, some superannuation fund members are at risk of losing important insurance that could provide them with income protection, total and permanent disability insurance (TPD) or life cover if they do not act quickly.
“There are Australians who may not be aware of how the upcoming changes to life insurance within super will affect them and their ability to financially protect themselves or their loved ones when they need it most,” said Suzie.
“The new rules apply to inactive super accounts, that is, those accounts that have not received a contribution in the past 16 months. For people who haven’t made a personal contribution or received mandatory employer contributions to their super accounts for 16 months or more, they need to be aware that they will lose their cover if they don’t take action by 30 June 2019.
“Also, the Australian Taxation Office will have the power to consolidate inactive super accounts with a balance below $6,000, so anyone with a super account should spend time understanding how these changes will impact them,” said Suzie.
All super funds were obliged to write to affected members informing them of the changes by May 1, yet the industry believes not enough super fund members are acting.
“Despite the fact that super funds have communicated with people about the changes, the tight time frame means that there isn’t much time for people to opt-in to insurance. That is, to let their fund know that they want to keep their life insurance cover,” explained Suzie.
While some funds may reinstate cover lost through the consolidation of low-balance, inactive super accounts, super fund members will be required to reapply for their life insurance and likely provide updated health and lifestyle details. If the member’s health or circumstances have changed since they first opened their super account and received insurance, they may not be eligible for the same cover they previously had.
“If superannuation fund members receive a letter or email from their fund asking them to ‘opt-in’ to their insurance, but don’t respond by June 30, the cover will be cancelled from July 1. Inaction, confusion, or simply not checking notifications from your super fund are some of the reasons why people may not realise they’re in danger of losing their insurance. That’s why it’s so important for people to pay attention to communications received from their super fund and to make deliberate decisions,” said Suzie.
In conclusion, Suzie reiterated the importance of life insurance: “The purpose of life insurance is to provide protection for those times when the unthinkable happens. If you are unsure how much insurance you might need should you experience a major health incident, or worse, it can be a good idea to seek professional advice, either through your super fund or from a professional risk adviser,” said Suzie.
Top tips from Integrity Life to prepare for the Protecting Your Super Package:
- Check whether you have any inactive superannuation accounts by visiting MyGov and linking to the ATO.
- For any inactive accounts, contact your superannuation fund, check your statement or access your online accounts to check your insurance cover.
- If you decide to retain your life insurance within any inactive super accounts advise your Superannuation Fund by 30 June 2019.
- Read all letters and/or emails from your superannuation fund and contact them with any questions.
How can impacted Australians avoid losing their insurance within superannuation?
- Contact your super fund and elect to keep your cover
- Make a contribution into the inactive account before 1 July
- Make sure you read all letters and emails from your super fund.
Summary of the changes effective July 1, 2019:
- Insurance cover cancelled for inactive accounts, i.e. accounts that have not received a contribution for a continuous period of 16 months and the member has not elected to retain their cover.
- Inactive super accounts with balances below $6,000 will be consolidated.
- Fees for low balance accounts ($6,000 or less) will be capped at 3% p.a.
- Exit fees will be banned across the board.
Summary of the changes effective July 1, 2019:
Insurance cover cancelled for inactive accounts, i.e. accounts that have not received a contribution for a continuous period of 16 months and the member has not elected to retain their cover.
Inactive super accounts with balances below $6,000 will be consolidated.
Fees for low balance accounts ($6,000 or less) will be capped at 3% p.a.
Exit fees will be banned across the board.