From 1 July 2019, new ‘Protecting Your Super’ laws come into effect. This means unless you have elected to keep your insurance within Super it could be cancelled leaving you and your family unprotected.
These rules prevent super funds from providing insurance cover to you if your super account is inactive, unless you specifically elect to keep your cover. Under these rules, an account will be considered ‘inactive’ if it has received no contributions or rollovers for 16 consecutive months.
We have a couple of major concerns with this. Firstly, people may not receive or read the communication from the provider and then end up with no insurance. We have clients who hold ínactive' super funds with the purpose of retaining their existing insurance as they are unable to obtain new cover elsewhere (or it is more cost effective than other cover they can get). Under this legislation there is a risk that they will lose their insurance and then be unable to obtain new cover or have to pay much higher premiums. This unintended consequence could drastically impact you or someone you know so please spread the word!
If you are unsure if this new legislation impacts you please feel free to contact us to discuss.
Secondly, the cost of insurance may skyrocket for group/default policies. We find that a lot of people do not even realise that they have default cover in industry funds and are often already paying considerably more (sometimes double) for the insurance than they would with a more comprehensive retail policy (that can also still be funded from the industry super account).
With a lot of peoples cover being cancelled under the opt-in arrangement the cost of group policies is spread amongst fewer members leading to large increases. Ironically this will erode Superannuation balances more than ever before.
If you have an industry or group super fund you may be paying considerably more for your insurance without realising... Contact us today for a free review of your insurance needs.