A level of life insurance and total and permanent disablement cover, and in some cases income protection, was often automatically provided when people joined a super fund. Recent legislative changes are designed to change that.
The changes to legislation on 1 April 2020 affect when cover starts for new members and how long their cover remains in place. When it comes to understanding the impact of these changes, it’s helpful to break them down by the different ways individuals may be affected.
Young fund members: If you’re under 25 and join a super fund for the first time from 1 April 2020, cover will not automatically be provided. You will need to have at least $6,000 in your account, in addition to being 25 years old, before cover may be automatically provided.
Low account balances: Even if you’re 25, or older, when you join a super fund for the first time from 1 April 2020, you’ll need to have at least $6,000 in your account before insurance cover may be automatically provided. If you’re an existing super fund member and have an account balance that doesn’t reach $6,000 at least once at some point between 1 November 2019 and 31 March 2020, your insurance cover may be switched off on or after 1 April 2020.
Contributions have stopped: Since 1 July 2019, any super account which hasn’t received any contributions for 16 months is considered ‘inactive’. As a result, cover will be switched off every time this happens, unless you’ve told your fund you want to keep the insurance in place. Of course, you can contact your super fund if you would like for your cover to be reinstated once it is switched off (subject to relevant reinstatement and eligibility criteria) or to have cover remain in place.
Why have things changed?
These changes are designed to help prevent insurance premiums from unnecessarily reducing retirement savings in super. However, they may result in some members who want to be covered, not having insurance in place.
It’s important that you consider your personal needs when looking at whether to retain existing insurance cover through super or opt into life insurance cover provided through super. If you have any questions, please get in touch with your super fund or talk to a wealth protection specialist at Elston.
If you would like more information please call 1300 ELSTON or contact us to speak to one of our advisers.