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Life/TPD Insurance thru Super Fund adequate?

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Martyvee, 12th Dec, 2007.

  1. Martyvee

    Martyvee Member

    Joined:
    2nd Jun, 2006
    Posts:
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    Location:
    Adelaide
    I was just after some opinions on the Life/TPD insurance as offered thru most Super Funds.

    We currently have a life insurance policy with CommInsure, and I was wondering if it would be a lot more cost effective to drop this, and just increase the units of cover with our super Fund's Insurance.

    What are your thoughts?

    Regards,

    Martin
     
  2. MJK

    MJK Well-Known Member

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    17th Aug, 2005
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    280
    Martin,

    My take on this is as follows. Sure its good for your cashflow but these super insurances actually cease to function when you leave work.

    Fine you say. I'll just start a new private policy when I achieve financial freedom and leave the work force... problem is you may be a lot older with pre-existing medical conditions by this stage. You may no longer be insurable or you may have to pay a bundle.

    The private policy will serve you no matter what your circumstance.

    MJK:D
     
  3. AsxBroker

    AsxBroker Well-Known Member

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    Location:
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    Hi Marty,

    Try and compare costs in different superannuation funds, as the ATO had advised that costs of insurance between different insurers can be substantial. Try and get a couple of quotes...

    When you say units of cover, this alludes to an industry fund, I'd definitely check out insurance costs between different super funds.

    There are no statutory limits to the tax effective insured amount inside super to your dependents (ie, spouse or children under age 18) as Reasonable Benefits Limits (RBLs) don't exist anymore (1st July 2007).

    I'm not quite sure why MJK thinks these insurances would stop because your employment stops, superannuation will go on indefinitely nowadays, insurances inside superannuation will stop at age 65, these may scale down between ages 60 to 65 or just stop at age 65 depending on your superannuation fund.

    A private policy in a super fund is more tax effective as the insurance company can claim the premium as a tax deduction so the cost is coming out of pre-tax dollars, whereas for individuals this would come out of post-tax money.

    MJK is also talking about the line of insurability, once you pass this you won't be able to get insured. Insurance generally gets more expensive as you age, this is a stepped premium as the premium "steps" up each year. You can also get level which means the premium is the same "forever" well until age 65, this is more expensive in the first few (6 or 7) years until the "stepped" premium is more than the level.

    Cheers,

    Dan

    PS This is general information, speak to your FPA registered Financial Planner before making an investment or insurance decision.
     
  4. MJK

    MJK Well-Known Member

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    I suppose its horses for courses but my industry super with ASF will cease to cover me if I leave employment. Perhaps other product dont stop like this. Anyway its worth checking out.

    Re stepped & level premium etc. I know about this. Its just that if you have to start from scratch, if your super cover stops, it can be bad timing.

    By all means if the super insurance continues untill you are 65 regardless of your income/employment status...then go for it I reckon.

    MJK:D
     
  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    My IBM super plan stopped covering me for life insurance 30 days after I left the company - I had to either sign up for their non-employee insurance offering (via the fund's insurer - AMP) or to arrange my own insurance elsewhere (which I did via my SMSF).
     
  6. Martyvee

    Martyvee Member

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    Location:
    Adelaide
    Thanks guys for your responses. I'll have to check all this out, as it would be annoying if the cover stopped.

    Martin
     
  7. AsxBroker

    AsxBroker Well-Known Member

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    Marty,

    If you don't automatically get cover let me know and we can setup a policy for you.

    Cheers,

    Dan
     
  8. Nigel Ward

    Nigel Ward Team InvestEd

    Joined:
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    One point to watch is to make sure there's an alignment between the payout conditions under the insurance and release conditions for super.

    It would be a problem if you get the payout from insurer but it's preserved in super.

    Cheers
    N.
     
  9. Kevin123

    Kevin123 New Member

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    Queensland, Australia
    Private

    You gotta find an insurance of your own.
     
  10. croc

    croc New Member

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    23rd May, 2013
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    Location:
    Sydney
    I have used Lifebroker in the past for Life Insurance, here is a link if you have any questions for them: Lifebroker