Gillian Bullock investigates whether life insurance cover through your super policy is your best bet.
It's estimated 70 percent of all life insurance policies are now bought through superannuation funds.
This estimate comes from the Investment and Financial Services Association (IFSA) based on the number of lives covered by group insurance policies under employer and industry superannuation fund arrangements.
However, if the measure was done on actual premiums in dollar terms, then this figure would drop to around 30 percent, says Clive Levinthal, general manager for life insurance products for Comminsure. That's because people taking out life insurance through their super generally pay lower premiums and consequently, have less cover than those with stand-alone policies.
As IFSA chief executive Richard Gilbert says, buying life insurance through your super can see you pay as little as $1 a month for life and/or disability cover through your fund taking out group insurance.
In addition, there may be tax advantages if you buy through your super as you will pay no tax on the premiums. In contrast, with a stand-alone policy you will pay your marginal tax rate which could be as high as 48.5 percent (including Medicare).
But Levinthal warns that insurance cover through a super fund is nowhere near as far-reaching as a stand-alone policy.
"Insurance through super does not include trauma insurance or long-term income protection cover," says Levinthal. "If your super does offer income protection and about 50 percent of funds don't the maximum benefit is only paid for two years. So if you are aged 40, your insurance will only cover you until you are 42. You really need to have cover through to age 65."
In addition, Levinthal says life cover in super is usually only for $100,000 to $200,000 when in reality, you probably need closer to $500,000 to $1 million to protect your family.
A positive, however, is that with group cover from your super you do not have to undergo a medical examination.
Super policies often also include total and permanent disability (TPD) cover, which, while beneficial, is only really effective in extreme circumstances.
"You have to be severely disabled to get a payment with TPD," he says. "If you are in remission with cancer then you won't necessarily be paid a benefit."
There is nothing to stop you taking out cover both through your super and independently.
Clearly some life cover is better than none. But it's good to check exactly what you are getting through your super.
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