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Several changes to life insurance within superannuation were announced in the 2018 Federal Budget, and while yet to be legislated it’s worth knowing how they might affect your nest egg.
Then Treasurer – and now Prime Minister – Scott Morrison announced on Budget night new measures aimed at changing insurance arrangements within super funds for some members.
His plan has attracted both support and criticism, with some arguing it will lead to the cancellation of some policies that shouldn’t be scrapped.
Currently many super funds have automatic policies for death, total and permanent disability and income protection.
The Government plans to alter this in relation to accounts that:
For accounts that are in one or more of the categories above, insurance would be offered on an opt in basis (i.e. not automatically provided) and for existing members who have balances below $6,000 or are inactive, insurance cover will be cancelled.
The changes are intended at this point to take effect on 1 July 2019, with the intention of preventing the erosion of super fund balances for workers with small balances. An unwanted side effect, though, may be to remove automatic insurance for many Australians who have a need for cover and would otherwise not have it. It is important to note that members will still have access to cover, however they will need to apply for it.
If you don’t manage your insurance in super, there’s a chance it will disappear.
The following members and prospective members will need to take steps to ensure their cover isn’t cancelled:
The Government’s proposed legislation says super funds must notify members when there has been no activity in their super account for six and nine months, outline the consequences of continued inactivity and outline the steps people can take if they want to continue their insurance – such as providing a written direction.2
“After 13 months of inactivity the trustee will need to notify the member that insurance premiums will no longer be deducted and that insurance cover will cease from the point in time when the member’s right to the cover has expired.”
If you have insurance cover with QSuper, how much do you know about it? Have you calculated your insurance needs?
Life is more secure when your insurance is tailored to your needs. QSuper is proud to be helping more than 400,000 members protect their future via insurance including death cover, total & permanent disability cover and income protection cover. There are many ways you can tailor all of these to reflect your life.3
Log in to Member Online to check the insurance cover you have, and to ensure it matches your needs.
1 Treasury document – Protecting your Super package
2 Treasury document – Protecting your Super proposed regulations
3 Insurance subject to eligibility terms and conditions. Please see the Accumulation Account Insurance Guide for more details.
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