Q: My daughter is a health care worker and has just been notified by her Super fund that they are cancelling her Insurance as she is under age 25.  Given the current environment this is the last thing she wishes to occur.  What options does she have to retain the insurance cover?

A: On 1 April 2020, the Government’s next round of Superannuation reforms became effective. Called ‘Putting Members’ Interests First’ (PMIF), the reforms are designed to prevent small account balances from being reduced by the impact of insurance premiums for those who may not feel the need to have insurance.

This means that from 1 April 2020, super funds can no longer provide automatic default insurance to new members who are under the age of 25 or to members with a ‘low balance’. A member is considered to have a low balance if, from 1 November 2019, their account balance has never reached $6,000.

Previously members who joined their employer’s super plan automatically received insurance cover such as Life insurance, Total and Permanent Disability insurance and Salary Continuance insurance regardless of their age or account balance.

For those who were employed prior to 1 April 2020, if their super account includes insurance but their account balance has not reached $6,000 at any time since 1 November 2019, their cover will be cancelled effective 1 April 2020 unless they ‘opt in’.

Super fund members will be considered ‘opted in’ if they made any of the following changes before 1 November 2019; they completed an application form for insurance (ie they did not receive default insurance), they applied for an increase in insurance cover, they notified their Superannuation fund about a change in smoker status or occupation to keep their insurance cover up to date, they transferred insurance from another super account or they previously ‘opted in’ under ‘Protecting Your Super’ to keep their insurance even if they are not contributing to the fund.

If a member’s Super balance was under $6,000 on 1 November 2019 and they haven’t ‘opted in’, the Superannuation fund will contact them to notify them of the cancellation of insurance.

If a member joins their employer’s super fund after 1 April 2020, they won’t be provided with insurance automatically if they are aged under age 25, or if they have a low account balance. Once they reach age 25 and have a balance of $6,000, their Superannuation fund may provide insurance automatically, subject to certain conditions.

Members can choose to ‘opt-in’ to have insurance at any time. If they opt in, they will receive a default level of insurance cover regardless of their age or account balance and insurance premiums will be deducted from their super account to cover the cost of the insurance.

To “opt in”, your daughter will need to urgently contact her Super fund and instruct them that she wishes to retain her insurance cover.