A SIMPLE phone call and question could potentially save you or your family from financial ruin in the event of an accident.
While most people have some sort of âdefaultâ life insurance cover paid for directly out of their superannuation, thereâs a real risk your claim could be knocked back.
Shine Lawyers superannuation law expert Melissa OâNeill said it was important for every worker to take a health check of their current insurance.
âInsurance being provided through super is a good thing, but the difficulty is that itâs effectively a one-size-fits-all,â she said. âIf youâre not investigating what youâre given and understanding what cover you have, that can be a problem down the track if you need to make a claim.â
Your employer pays money into your super fund, which in turn takes a small amount of your contribution and pays it to an insurance company. That company then provides life insurance coverage to all the members of that fund.
Insurance through your super fund can be cost-effective because it doesnât come out of your everyday cashflow, and because youâre paying out of pre-tax dollars.
Most policies will cover members for death and TPD, or total permanent disability, meaning if you die or suffer an injury or illness leaving you unable to return to work, you get a lump-sum payment.
One of the risks, according to Ms OâNeill, is that the amount youâre covered for wonât be enough to provide for yourself or your family in the event of an accident.
There are also many situations in which a change in your circumstances â changing from full-time to casual, or working past 65, for example â could leave you ineligible to claim, despite paying your premiums.
âThe first thing people need to do is ring their super fund and very simply ask the person, âAm I covered for death and TPD? If so, how much is it, and please may I have the paperwork that outlines exactly what Iâm covered for?â,â Ms OâNeill said.
âIf youâre in one of those situations (such as shifting to casual) or recently changed jobs, ask the fund specific questions about how those things can affect your insurance.â
The final thing is to sit down with your family and figure our how much money you might need if something happened that meant you were unable to continue working.
âThe classic case is how much do you need to pay off your mortgage,â she said. âDo the sums and ask the questions.â
According to Ms OâNeill, these are the six biggest mistakes people make with their superannuation insurance that could leave them at risk.
âą Not letting the fund know you are working as a casual
âThere are a lot of funds that are now excluding casual workers, or those working less than 15 hours a week from cover under their policies.
âIronically those funds are often the ones that are specifically designed to benefit those in the retail or hospitality industries which are mostly casual. You are considered a casual worker if you donât have regular guaranteed hours and are not paid sick leave or annual leave.â
âą Not telling the fund you have a new (and dangerous) job
âThere is some insurance that excludes coverage if you are in a hazardous occupation, for example a long haul truck driver, underground miner or a roofing labourer or builder working on platforms over 10 metres high.
âIf you fit into this category you could be paying premiums for insurance that just wonât cover you if you are injured and have to stop work. You also need to notify the fund you have changed jobs.
âNot every employer uses the same fund and if you stop making contributions or your balance falls below a set amount your insurance can become null and void.â
âą Not telling your fund youâre over 65
âMany of us are working longer past the traditional âage of retirementâ but some insurance policies wonât cover you if you are over 65.
âThis is mostly because older workers are more vulnerable to illness and injury. Lots of policies have also not caught up with the 67 benchmark for retirement and our desire/need to work longer.â
âą Not reading your paperwork
âSuper funds can change their insurance arrangements every so often. The fund is required to tell you about that and might send you a letter or an email. Donât ignore it, make sure that you read and understand any notices that you get from your super funds.
âIf you arenât clear about the changes then ring your fund for clarification. The change could mean the policy no longer suits your needs and you may not be able to make a claim when you need to in the future.
âFor example, Sunsuper has now changed its arrangement so that it will no longer pay a lump-sum TPD payment, but will âdrip feedâ payments over six years, making its customer apply each year for the benefit.â
âą Forgetting about your mental health
âIf you have any sort of history of mental illness, even including mild and temporary periods of stress such post-natal depression or work difficulties for which you have seen your doctor or counsellor, you should check your insurance coverage.
âMany funds are now excluding mental health issues as a claimable item, but are not specifically setting that out in their Product Disclosure Statements. For example, the new SmartMonday policy with AIA has a definition for many common occupation categories where an inability to work due to a mental illness isnât covered.
âIf you believe your mental health could be a barrier to you working in the future then check it is covered by your policy. The growing awareness that mental health is a big issue in todayâs world is not being recognised by funds and insurers, and there is a need for them to change their approach to offing insurance in this regard.â
âą Not disclosing ALL your medical history
âIf you are applying for insurance and are required to provide a detailed personal statement about your medical history â disclose everything, and we mean everything.
âInsurers have a nasty habit of engaging in what is called âpost-claims underwritingâ â that is, they insure you based on what you tell them, often for years at a significant cost to you, and then when the time comes to make a claim, they dig into your medical history and allege some sort of ânondisclosureâ offence and decline your claim.
âMake sure if you are relying on insurances through your superannuation that you check the fine print, keep up-to-date on any changes and seek legal advice if you need help.â
Source: Shine Lawyers