ITP Research Team
Income protection insurance is available as a part of many superannuation funds. In fact, more than 70% of Australians have income protection insurance through their superannuation! It pays to understand what and how you are covered, as many insurance policies may not fully cover you to the extent you think.
How It Works
Your insurance premiums are paid from the money in your super account. Usually these insurances are cheap compared to other plans you may take out individually and are offered through your employer, making it an affordable option for many people. Because these funds are paid in bulk, the premiums are lower and there is no need for underwriting.
Warning: If you’ve left your employment, and your superannuation fund, fees may still be taken out which will erode your balance. On 1 April 2020, updates to super laws aimed to protect certain super accounts from being eroded, were introduced. As a result, to be eligible to receive default insurance with your employer super plan, you must be over 25 and over, have a balance of at least $6,000 and not have an inactive super account.
Superannuation funds will automatically cancel insurance fees on those funds that have been inactive for at least 16 months. Insurance funds have their own rules on accounts with low balances.
Pro Tax Tip: It pays to be aware of how many superannuation accounts you have and to roll your cover into one. This will save fee repetition and will also impact your overall superannuation savings.
If you’re under 25, insurance will not be provided to you if you’re a new fund member unless you write to your fund to request cover or you work in a dangerous job.
Types Of Super Cover
Typically, there are three types of insurance offered through superannuation accounts:
- Life Cover – also known as death cover which pays a lump sum to your beneficiaries when you die or if you have a terminal illness
- TPD Insurance – paid to you if you become seriously disabled and are unlikely to work again
- Income Protection Insurance – pays up to 75% of your pre-tax income for a period of 2 or 5 years or up to a certain age.
Pros and Cons
It’s good to be aware that although there are certain benefits to insurance policies available through your super, they might not be what they seem to be when it comes down to crunch time. Many Australians have been caught out as they simply didn’t understand what they were and were not covered for.
Pro Tax Tip: If you’re not sure of your cover, a chat with a friendly ITP Tax Accountant will help you understand your cover and what will work for your circumstances.
Read The PDS
Tax time is a great time to make sure you’re on track financially. Take this opportunity to phone your insurer, or access them online, to check out your super fund’s annual statement and the PDS. You’ll be able to see what type of cover you have, how much you are covered for and the cost of your fund. Don’t forget to check the terms and conditions of making a claim should there come a time you need to.
Don’t pay more than you have to!
That’s the same for tax, bills – and your insurance policies whether it be a part of your superannuation fund or a personal premium. ITP offers a range of insurances and can tailor a fund that will suit your needs and pocket. Call 1800 367 487 today and chat with one of our friendly consultants for no-obligation advice.
ITP The Income Tax Professionals help over 300,000 Australian individual and small businesses with their tax each year. They are professionals that have studied tax law and can help you with difficult circumstances such as deceased estates. ITP also set up and manage trustee estates and can act as a legal executor. Speak with a Professional today and see how they can help you.
Call 1800 367 487, or book online at www.itp.com.au and your tax agent will be in touch to help.