Superannuation isn’t just a tax-friendly investment for the future. Many Australians also hold important personal insurances through their super—like life cover, disability insurance and income protection insurance.
It’s estimated around 93% of fund members have life cover through their super, and it tends to be an easy option as you may not need a medical examination to take out basic protection. It can also be cost effective as premiums can be paid out of your employer’s super contributions rather than out of your take-home pay.
The presence of simple, low-cost insurance is something to bear in mind if you are considering switching from one fund to another. Some funds will let you transfer cover from an old fund but do be sure you can access the same level of cover. Take special care if you have a pre-existing medical condition as this could see you knocked back for cover by the new fund.
Insurance cover is also a good reason to consolidate multiple super accounts into a single fund. You could also be paying several lots of premiums which will eat away at your retirement savings.
The downside of holding insurance like life or disability cover through super is that many of us have only a vague idea about how to make a claim. Research by the Association of Super Funds of Australia (ASFA) found some people reckon the process is so complex you need a lawyer to assist with making a claim.
It’s actually quite straightforward to make a claim on insurance held through super and it’s worth having at least some idea of what’s involved because if you ever need to make a claim it’s likely to be at a stressful time.
The starting point is to get in touch with your fund, explain the situation and complete the paperwork they send out. You may be asked to provide other information from your doctor or employer but generally about 90% of claims are paid out hassle-free.
To make the process even easier, ASFA has produced a booklet that explains how to make a claim in eight clear steps.
It’s information worth having. Download a copy of the ‘How to make an insurance claim’ guide from ASFA’s Super Guru website. You’ll find the site has plenty of other useful fact sheets on super as well.
Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.