Are you one of the many superannuation members who have insurance cover attached to their accounts without even realising it? Recent regulatory action highlights serious concerns about delays in processing claims, with thousands of members and their families affected. So if you do have insurance in your super, now is the time to:
- check what you’re covered for,
- understand when that cover might end, and
- ensure your loved ones won’t face unnecessary hurdles if they need to make a claim.
As you approach or enter retirement, you may find that your superannuation insurance – life, total and permanent disability (TPD), and income protection – no longer fits your needs. If you’re no longer working, the need for these types of cover can diminish – and continuing to pay premiums might be draining valuable retirement savings.
What types of insurance are included in super?
Most super funds provide default group insurance for members in accumulation. This typically includes:
- Death cover (life insurance): pays a lump sum to your beneficiaries if you pass away.
- Total and permanent disability (TPD) cover: provides a payout if you’re permanently unable to work due to injury or illness.
- Income protection insurance: offers ongoing payments for a period if you’re temporarily unable to work.
This cover can be a cost-effective way to access insurance, but it’s important to understand the terms and conditions.
Delays in claims processing are under scrutiny
Regulators have taken action against several super funds over delays in processing death benefits and TPD claims. Investigations suggest that significant numbers of members and their families have experienced lengthy waiting times—sometimes stretching to years—despite providing all the necessary information.
One case brought by the regulator alleges that nearly a quarter of recent complaints about death benefit claims involved delays in processing, with some cases taking more than 1,000 days. Another case involves thousands of members waiting over a year for their claims to be resolved, with reports of funds failing to notify regulators within the required timeframe.
These issues highlight growing concerns about how super funds manage insurance claims and whether they are meeting their obligations to members. Regulators are aiming to ensure trustees are fully accountable rather than shifting blame to third-party administrators.
Why are delays in claims processing a problem?
For grieving families or those unable to work due to disability, delays in receiving death and TPD benefits can cause significant financial distress. While super funds have an obligation to process claims efficiently and fairly, some cases have shown that this doesn’t always happen.
If your super includes insurance cover, it’s crucial to understand the claims process in advance so that you and your loved ones aren’t caught off guard if the need to claim arises.
When does your insurance cover end?
Many people assume their super insurance will always be there when needed, but policies often lapse without warning. Common reasons include:
- Low balance: If your account falls below $6,000 and hasn’t received contributions for 16 months, your insurance may be automatically cancelled under Protecting Your Super laws.
- Age limits: Cover usually ends at a certain age, often between 65 and 70.
- Changing jobs or funds: If you switch super funds, your previous insurance may not transfer across.
What should you do now?
To ensure your insurance meets your needs:
Check your super account: Log in to see if you have cover and, if so, what you’re paying for.
- Review your level of cover: Consider whether it’s sufficient for your needs and whether premiums are eating into your super balance.
- Nominate beneficiaries: Ensure your death benefit will go to the right person by making a valid binding nomination.
- Know the claims process: If your family needs to make a claim, understanding the process in advance can help avoid delays.
Why review your insurance cover?
Insurance in super can be a valuable safety net, but only if it’s working as intended. The recent ASIC cases highlight the risks of poor claims handling, making it more important than ever to review your cover and understand your entitlements.
Retirement Essentials helps retirees to gain clarity and control over managing their superannuation and investments, and plan for retirement. If your current insurance doesn’t match your needs, making changes could reduce costs and boost your retirement savings. A Retirement Advice Consultation with one of our qualified advisers can provide you with the guidance you need to take the right actions at the right time.
Alternatively, if you are at the beginning of your retirement journey and unsure where and how to start, a Retirement Health Check will set you on your way.
How about you?
Have you checked if your super insurance still meets your needs?
Are you aware what would happen if you or your family needed to claim tomorrow?
This article is provided by Retirement Essentials Representative Number: 001260855. We are an authorised representative of SuperEd Pty Ltd ABN 88 118 480 907 AFSL #468859. This information is not intended as financial product advice, legal advice or taxation advice. It does not take into account your personal situation, goals or needs and you should assess your own financial situation, consider if the information is suitable for you and ensure you read the relevant Product Disclosure Statement (PDS) if you choose to make any changes to your financial situation. It is always advisable to consult a financial adviser before making financial decisions.
Hi re the statement
Nominate beneficiaries: Ensure your death benefit will go to the right person by making a valid binding nomination.
when drawing up a new will the solicitor warned that by naming beneficiaries as opposed to just your estate the beneficiaries pay a highr rate of tax on the sums than if nominated in the will to receive the super balance. Can someone clarify this?