As a member of a Superannuation fund most likely you will have an insurance benefit included in the fund. But do you know how much you are covered for? How much is it costing you or your fund?

Speaking generally, almost all employer sponsored superannuation funds have at least some level of “automatic” insurance cover.

What is an employer sponsored superannuation fund?

An employer sponsored superannuation fund is a superannuation fund that your employer pays your compulsory superannuation guarantee (SG) payment to on a regular basis.  Often referred to as a “default” fund. When you start with a new employer and do NOT nominate a fund of choice, you will be admitted to the default fund.

It’s important to investigate if that fund is right for you and understand what your “automatic” insurance entitlements are.

Almost all employer sponsored super funds are obliged to offer a super fund that has at least some level of insurance cover

What is automatic insurance?

Automatic insurance is a defined level of insurance cover you receive when your employer makes their first contribution to that fund.

There are limits on automatic insurance, commonly referred to as Automatic Acceptance Limits (AAL). Each fund and employer plan is different and the level of cover varies. This is why it is vitally important to examine the structure before joining the fund to ensure it meets your needs. If you fail to inform the super fund that you don’t want the insurance (opt out) then it will be put in place for you.

Keep in mind that automatic insurance can be one of the great advantages of having insurance cover within your employer fund, you are automatically covered without having to endure a long application process or underwriting that may require medical reports and examinations that is usually part of having insurance outside of super.

You may elect to cancel the cover if you do not require insurance but be careful. If an unforeseen event occurs neither your employer nor your super fund are responsible to provide you an insured benefit.

Automatic acceptance covers a level of life insurance/death cover and total and permanent disability cover (TPD). You may often see the words Death/TPD on insurance policies and superannuation statements, combined with the “amount insured” which would be the benefit amount you would receive in the event of an eligible claim. This level of cover may vary depending on your age and even the type of work you do.

What is Temporary Salary Continuance (TSC) or Income Protection (IP)

This type of cover can protect you if you are unable to fulfil your work duties due to illness or injury. It pays you a replacement income for a set period of time usually ranging between 2 years and to age 65.  A waiting period applies which is the period of time you need to be off work before a claim is paid. Usually between 30 days and 90 days.

Often, TSC or IP is a benefit attached to an employer super funds. As with Death/TPD, the level of cover varies from fund, it can be very attractive to have such insurance cover, particularly if there is automatic acceptance offer without having to endure medical examinations or providing detailed personal information regarding your health, otherwise known as underwriting.

So what is the advantage of having insurance cover within an employer sponsored superannuation fund??

There are two main reasons:

1: The premiums are paid from your superannuation, so you don’t have to pay for it out of your take home pay

2: Automatic acceptance provides cover without having to go through an application process which may include medical examinations (underwriting)

So what should I do now?

Insurance should always be based on your specific needs, ensuring you have the right cover, for the right amount in the right structure.

The way to check what you are currently insured is by calling your super fund or checking your superannuation member statement.

Should you wish to discuss your insurance needs contact me via e-mail without obligation.

Next week we will talk about the Federal Government Co-Contribution Benefit.


David Luciani
Corporate Services Specialist

Follow David on Twitter @DavidGLuciani