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Life insurance loopholes: How well do you know your policy?

Couple in front of a sunset | Shine Lawyers

There is no doubt that superannuation funds in Australia shamelessly fight for your membership. Given Australians’ retirement pooled savings have exceeded over $2 trillion, it comes as no surprise that the television, radio and internet are flooded with enticing advertisements from the superannuation sector. With employer contribution rates increasing since 2014, this fund of retirement savings will continue to grow.

Super funds act as the guardians of our retirement savings and the law places strict obligations to ensure our money is managed effectively and appropriately.

Protections under your superannuation

Most Australians might not know this but super funds also purchase life insurance policies on behalf of their members, including income protection insurance, death insurance and total and permanent disablement insurance (TPD). This insurance is essential in protecting us should we be unable to work because of injury or illness.

Because of the strict laws that apply to super funds in Australia, you would assume they would act in the best interests of their members when it comes to purchasing appropriate group life insurance policies.

However, the unfortunate reality is that the duty is actually on members to run through these policies with a fine toothcomb to ensure the insurance will cover them when they need it.

What’s covered in your policy?

As consumers, we are often flooded with product disclosure material and PDS documentation from our super funds. It can be difficult to decipher what you are actually covered for. Commonly, and highlighted in the media this year, life insurers have become experts at avoiding claims based on strict exclusion clauses buried deep in this paperwork.

REST: Read the fine print

Take for example the Retail Employees Superannuation Fund, also known as REST. With a strong membership of 2 million working Australians and over $39 billion in retirement funds being invested, REST also boasts paying Death and TPD insurance claims to the tune of $340 million last financial year.

However, it is important to read the fine print. To be eligible to make a claim for your life insurance via REST, you need to meet the Active Employment Definition set out in the contract of insurance. A hurdle, particularly for casual employees, is that it requires REST members to be working a minimum of 30 hours per week for a period of at least two consecutive months prior to them stopping work due to injury or illness.

In light of the fact that REST is a super fund founded upon retail employees and that 1 in 5 Australians are employed casually, REST members need to pause and check that their insurance actually meets their personal circumstances.

Know your fund, know your rights

Life insurance offered through your superannuation fund can provide great comfort and protection if tailored correctly. If you are a member of a super fund and pay life insurance, scrutinise your member statement carefully. Check the life insurance you pay for actually provides you with cover in the event that you are unable to work. Ask questions from your fund and have them confirm cover in writing. And finally, ensure you seek appropriate advice from a financial adviser and lawyer.

At Shine Lawyers, we have a team of carefully selected Superannuation and Life Insurance claim experts. Our lawyers can assess your situation, and help determine exactly what you’re entitled to under your superannuation policy. Get in touch today for an obligation-free first consultation. 

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Written by Shine Lawyers on . Last modified: March 14, 2018.

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  • Tonya Christie wrote:

    I enjoyed this write up and can attest to the fact that having made a claim for tncome protection when I was injured in 2015 and your company represented me with a Workers Compensation claim ( James Hunter and Glen Brown) it became a circus with paperwork either they losing it (but I used my Loss Prevention background and documented it and sent it through registered post which they hated)there was also the fact that ‘Rest’s’ wording in their policy was not concise and transparent and when I made the initial claim the ‘consultant’ did not disclose this aspect to me which I said was deceptive and misleading I said as such to them and consequently lodged a complaint with the Superannuation Complaints tribunal, along with the fact that the ‘common’ person does not know that once you have the money come through that you have to pay it back to them if you win on a civil lawsuit with a Workers Compensation claim to which I was not aware of and speaking with other people they thought the same – after all I had been paying my own money into the fund since the commencement of Rest (1988,) and upped my income protection over time to boot and never made a claim the whole time. .I have added in my argument to the tribunal I would have been better off saving the money in a separate bank account for instances like mine being the injury.. I have since stopped my income protection payments as I find them a waste of money. And my complaint to the tribunal is being heard. And without getting ‘political’ I do take issue with some of the board members on Rest being affiliated with the SDA – there seems to be a conflict of interest between ethically supporting members financial welfare and representing the business corporate interests of Rest.
    Keep up the good work as your blog is read by me often and is very informative.

  • Phillip wrote:

    Why is the suoer component not calculated as quoted in the schedule.
    $1,700 monthly benefit
    9% super $153
    91% balance $1,547

    REST says
    $140.37 Super
    $1,559.63 Balance

    $1,559.63 x 9% = $140.37

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