5 myths about life insurance

EducationArticle1 June 2023

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5 myths about life insurance through your super

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Heard people badmouthing life insurance through your super? The facts are more positive.

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Life cover has been available through people’s superannuation accounts for many years, but because premiums are paid for directly from the super balance, it’s not something many people pay attention to or know much about. That’s given rise to some misinformation.

Let’s start with the basics. There are three sorts of life cover available through your superannuation:

  • Life insurance, which pays out an amount to your family if the worst happens. You can also claim on life insurance if you become terminally ill.
  • Total and permanent disablement, which can provide valuable income if accident or illness means you’re no longer able to work.
  • Income protection insurance, which may provide a regular income if an illness or injury means you’re unable to work for some time.

Life insurance and total and permanent disablement cover are included by default by most super funds, but not if you’re a new member under age 25 or your super balance is less than $6,000. If that sounds like you, you’ll need to contact your fund to opt in to life cover (it’s easy). The exception is if you work in a dangerous job, such as construction, and your fund chooses to give you automatic cover.

So now you know some fundamentals, let’s start myth busting.Isn’t insurance expensive?

Myth 1: It's hard to claim when you need to

A benefit of holding your insurance through your super is that it gives you a place to go when you have questions or need to make a claim. Claims are made through your super fund, whose team liaises with the insurer. Contacting your super fund is your very first step to making a claim. And if you’re worried that holding insurance through your super makes it hard to get a claim paid, don’t be. Figures from the Australian Prudential Regulation Authority (APRA) show that in 2021 group super insurance paid 89% of total and permanent disability (TPD) claims, compared with 67% of TPD claims paid to people who’d organised their policies directly with insurers (without using a financial adviser).1

Myth 2: You can’t decide how much cover you want

It’s true that if you get insurance through your super you’re initially offered a default level of cover, but that doesn’t mean you’re stuck with it. You can choose to increase that benefit amount or change some of the details, such as the waiting period before you’re paid income protection. A financial adviser can help you work out the appropriate level of cover for your individual circumstances.

Myth 3: You can’t change or cancel your policy

You can opt out of your life cover policy altogether or reduce your level of cover by contacting your fund. If you want to reinstate your insurance or increase the benefit, you may need to answer questions about your medical history or even (not always!) have a medical check before your application is accepted.

Myth 4: If your super contributions stop, so does your insurance cover

It’s good to know your insurance cover can continue even if your super contributions pause for a little while. You’ll need to make sure tell the fund you want payments for insurance premiums to continue even if the balance falls below $6,000. You should also make a super contribution at least once every 16 months so the account doesn’t become inactive. Your fund should give you plenty of warning if this is in danger of happening.

Myth 5: Insurance is too expensive

When you’re starting out, there’s probably a lot of other things you’d prefer to spend money on than life insurance. That’s why getting life cover through your super fund makes a lot of sense. Your super fund buys insurance policies in bulk and can offer you insurance at a cheaper rate than if were buying comparable cover as an individual. In addition, your insurance premiums are paid for from pre-tax contributions to your superannuation account, so it’s even easier on your hip pocket.

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The best thing to do is talk to an expert

When you’re making decisions about your future, it’s best to get some expert guidance. Give us a call on <<phone number>>, email us on <<email address>> or contact us through <<website address>> to talk about your options.

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“Your insurance cover can continue even if your super contributions pause.”

1APRA, Life Insurance Claims and Disputes Statistics December 2021, issued 19 April 2022, accessed 8 September 2022.

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Introduction Heard people bagging life insurance through your super? There are plenty of myths out there – but the facts are quite different.
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Five top myths we’d like to counter

Myth 1: It’s hard to claim when you need to

APRA data shows that in 2021 group super paid 89% of total and permanent disability claims – much higher than similar claims paid directly through insurers.

Myth 2: You can’t decide how much cover you want

You start with a default level of cover, but you can increase the benefit amount or change details.

Myth 3: You can’t change or cancel your policy

No! You can opt out of your life cover policy altogether or reduce your level of cover by contacting your fund.

Myth 4: If your super contributions stop, your insurance does too

You’ll need to make sure its balance stays at $6,000 or more, or tell the fund you want payments for insurance premiums to continue even if the balance falls below $6,000.1 You should also make a super contribution at least once every 16 months so the account doesn’t become inactive.

Myth 5: Insurance is too expensive

When you’re young, there’s probably a lot you’d prefer to spend money on. But your super fund buys insurance policies in bulk and can offer you a cheaper rate than if were buying cover as an individual.
CTA To learn more, read our full article <here>

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Introduction Heard people bagging life insurance through your super? There are plenty of myths out there – but the facts are quite different!
Body

Five top myths we’d like to counter right now:

Myth 1: It’s hard to claim when you need to

Myth 2: You can’t decide how much cover you want

Myth 3: You can’t change or cancel your policy

Myth 4: If your super contributions stop, your insurance does too

Myth 5: Insurance is too expensive
CTA To find out why they’re myths rather than reality, read our full article <here>

This information provides an overview only on specific topics and may be limited in scope or subject to qualifications and generalisations. It is provided for your use with insureds and superannuation fund members.

The information provided is also designed to be provided to insureds and superannuation fund members under your own name and any applicable licenses. You will need to consider whether the information is required to be changed or qualified in doing so. To the extent that there is inconsistency between the information on this website and the relevant policy, the policy will take precedence. You should take professional advice and review the appropriateness of the information before it is used by you.

This information does not consider any specific personal needs, objectives, or financial circumstances.

© Zurich Australia Limited ABN 92 000 010 195, AFSL 232510. Information within it is current as at May 2023 but may be subject to change. Updated information will be available by contacting Customer Service on 131 551.
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