16 Oct 2018
Four changes that may inadvertently impact the level of cover provided by life insurance purchased through Superannuation.
Many Australians choose to buy their life insurance through Superannuation and often this helps with affordability and provides a guaranteed level of cover but it's a compromise solution. It's also important to note that seemingly innocuous life events may impact the level of cover provided by life insurance purchased through Superannuation.
Here are four changes to be aware of.
1. Consolidating your Super funds
Rolling all your Super into the one fund can prove to be a wise move – it may save you administration fees, reduce your paperwork and make it easier to keep track of that retirement nest egg.
Commonly, people will look at exit fees and investment performance when deciding where to consolidate their Super, but it's also extremely important to consider the impact of consolidation on life insurance coverage.
That's because life insurance can be discontinued when you move funds, and not all funds offer a level of coverage that may be appropriate for you and your family.
If you wish to consolidate funds, in addition to other personal considerations, consider the life insurance, total permanent disability insurance and income protection insurance options available in the chosen fund.
2. Changes in personal relationships
If you experience a major change in your personal relationships, it could impact your insurance arrangements. Depending on your circumstances, it may be appropriate to update the details of your insurance beneficiaries with your Super fund.
3. Reaching age 65
Before you hit this milestone you may wish to take a look at what life insurance your Super fund offers beyond the age of 65 as many super funds stop providing life insurance when members reach a certain age (usually 65 or 70).
Having said that, there are policies available outside superannuation, that may help you stay protected for longer.
4. Withdrawing Super
There are circumstances under which you can access your Super early, including compassionate grounds, terminal medical conditions and severe financial hardship. But it's important to consider that if you withdraw a large amount of Superannuation from your fund, your life insurance coverage may be adversely impacted or discontinued altogether.
There are alternatives to purchasing insurance through your super. Importantly and in view of the variations from one product manufacturer to another it is always best to speak with your PSK adviser to understand which policy or policies best meet with your individual circumstances and needs.