Although many Australians have life insurance as part of their superannuation, a report by insurance actuary firm Rice Warner found the median default cover in super meets less than half of the basic household income needed to maintain current living standards until the person reaches age 65. Families with one child are covered for less than 25%1 of their basic income.
Premiums are also charged on life insurance through your superannuation fund which are deducted from your super balance, reducing the money you’ll have available for your retirement. Additionally, if you change super funds, or your employer’s contributions stop, your life insurance cover may end without notice2.
Many Australians are increasingly taking out another life insurance policy to close the gap between their default life insurance cover with their super fund and what they actually need to maintain their family’s lifestyle. And rather than having their super contributions going towards insurance premiums, they can enjoy a greater retirement fund when it’s time.
With so many options available in the market, it can be overwhelming and daunting when trying to decide which one will suit you and your family’s needs best.
Some overall points to consider include:
1. “Australia’s relentless underinsurance gap” 8 September 2016, Rice Warner
2. “Insurance through super” last updated 19 August 2016, ASIC’s MoneySmart