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Is your Superannuation insurance cover getting cut off?


Is your superannuation insurance getting cut off?

Hundreds of thousands of Australians should have received letters from their superannuation funds recently telling them their insurance may be cut off. This is referring to the total and permanent disability (TPD) and death insurance many Australians have within their super along with income protection insurance some Australians also have.

By 1 December 2019, super funds have to notify members with small accounts that their death and disability insurance cover will be cut off on 1 April 2020, unless they tell the fund they want it to continue.

Most super funds include death, total and permanent disability (TPD) and income protection insurance benefits. These benefits can be worth hundreds of thousands of dollars and save you and your family from welfare dependence if you get sick or injured and cannot work.

How are super funds determining whose insurance might be cut off?

If your account has less than $6,000 at all times between 1 November 2019 and 1 April 2020, you will lose any insurance cover you have. This follows on from a change in July this year when super funds were forced to cut off insurance cover for inactive accounts. Young workers under 25, opening new super accounts, will also not get insurance cover, unless they specifically ask for it.

How can I retain my cover?

The only way to keep the insurance cover going is to notify the fund you want to retain your cover or make a contribution or rollover to increase the account to $6,000 or more.

Some occupations are exempt

If you are in a dangerous occupation, you still may get automatic cover, but you would need to check that with your specific super fund.

Why has this change come about and how does it affect me?

The reason for the changes is to protect super funds from being inappropriately eroded by fees, charges and insurance premiums.

If your insurance cover is cancelled and you later decide you want to take out cover again, you may have to fill in a health questionnaire and risk being refused cover, particularly if you have any existing health problem.

None of the changes affect your rights to make a claim if you stop work (or for your dependents to make a claim if you die) before your insurance is cut off but you could lose valuable insurance cover for future events after 1 April 2020.

If you don’t get a letter by say early December 2019, it would still be a good idea to check with your super fund because they may not have your current address or update details.

For most Australians, the only life and disability insurance cover they have is through their superannuation so it will be important to think carefully about whether to continue your cover.

Get help

Superannuation and insurance can be complex. If you have any questions, it’s important to get expert advice.

Berrill & Watson Lawyers provide a free service to help you understand your rights and entitlements.

Call us on 03 9448 8048 for free advice.

You can also visit the ASIC MoneySmart website for further information.

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