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Low super balance? Your superannuation insurance is at risk

Most superannuation accounts have built-in insurance policies which cover you if you are unable to work due to illness or injury. This includes total and permanent disability cover and income protection which are designed to help you when you need it the most - some even cover an untimely death.

The insurance cover contained in these policies is often cheaper than having a separate life insurance policy, and the fees are taken out of your super balance. Insurance through your superannuation is also granted without having to firstly complete a health questionnaire.

As part of new legislation called ‘Putting Members’ Interests First’, several reforms have come into place to protect your retirement savings by ensuring your super isn’t eroded by unnecessary fees due to premiums on superannuation insurance policies. Here is what you need to know.

Effective April 1, 2020, the following Australian superannuation changes could affect you:

If you have a new superannuation account containing under $6000 or you are under 25 years old, you will no longer have default insurance.

If you are an existing super fund member with a low super balance, regardless of age, your insurance will be not cancelled:

  • if your balance reached $6,000 between November 1, 2019 and March 31, 2020;
  • or if you ‘opted in’ to keeping your cover;
  • or if you ‘opted in’ to keep your cover before November 1, 2019 due to your super account being inactive (Inactive means that your super account did not receive any contributions or rollovers for 16 months).

Was your super balance above $6,000 as of November 1, 2019? Your insurance will not be impacted.

Already stopped work due to injury or illness? You may still have a claim but working after the end of March may mean that you will lose your cover.

So, how can you make sure you are covered with super insurance from April 1?

If you want to be covered by your superannuation insurance, simply contact your super fund before March 31 and elect to opt-in to the default insurance regardless of your account being inactive or having a low balance.

Your super fund should have reached out to alert you that you can opt to continue your cover. If you have not received this letter due to a change of address, contact your super fund to find out more.

You must read all information that your super fund sends you, whether by email or letter. Investing time now into understanding what insurances you do and don’t have in your super is essential before finding out you’re not covered when you need it most.

All individual circumstances are different so it is important to obtain the right financial advice before making any changes to your super or your life insurance products.

Shine Lawyers - we're here to help

Shine Lawyers have an experienced legal team to assist everyday Australians with accessing their super and insurance entitlements if they cannot work due to injury or illness. Our lawyers are experts in Superannuation and TPD claims and can answer any questions you may have about your potential super entitlements. Contact us now.

Written by Shine Lawyers. Last modified: March 16, 2020.

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