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


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 September 29, 2017. Last modified: September 26, 2018.

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