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What's the best way to get insurance organised?

Making sure you’re getting the best deal on insurance without missing out on the cover you need can feel like a minefield. Get to know where and how to buy.

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Your insurance options

Is your insurance cover in super enough? If you’re looking at ways to get protected, Josh from the IOOF team has some friendly advice to help you out.

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The low down on buying insurance

There’s no two ways about it; insurance can be pretty dull. Reading through a product disclosure statement is unlikely to excite you, but taking the time to understand your options can definitely pay off. So keep reading and try not to nod off!

Getting insurance through your super

One way to get insurance is through your super fund. The insurance cover is added to your account and premiums are paid straight from your super balance. Your super fund will usually offer you Total and Permanent Disability (TPD) cover and Life cover (also known as Death cover) as well as Income Protection, that could cover you, if you are temporary disabled through illness or injury. Sometimes your fund may even add them automatically, which could mean you may have insurance cover without even knowing it. Income protection for loss of income is usually an optional add on.

Find out more about the different types of cover available

Like with most of your money choices, there are pros and cons of going through your super fund for insurance.

The pros:

  1. It’s easy and convenient
    Your super fund will usually have a single policy they have negotiated for all their members. You’re already a member of the super fund so it’s a pretty painless process to get cover under that ‘group’ policy. Some funds may also offer a range of other insurers for you to choose from.  

  2. No impact on your take-home pay
    Your insurance premiums are paid directly from your super balance so you won’t even notice that you’re spending the money. You won’t need to put your hand in your pocket each month.

  3. Cheaper premiums
    Most super funds buy a group policy for thousands of members, which means they’ve got bargaining power. This can sometimes give you access to cheaper insurance premiums by going through your super fund.

  4. Potential for tax savings 
    Your employer's super contributions and any salary sacrifice contributions you make are taxed at the concessional rate of 15%, which could be less than your marginal tax rate. This can make paying for insurance through your super fund more tax-effective should you choose to do so.

And the cons

  1. Your retirement savings take a hit
    While paying your insurance premiums from your super balance means you’re not out of pocket for them each month, your super balance – and your savings for retirement –  are taking the hit. It’s a double whammy – you lose out on savings with each payment, plus the compound interest you could have earned on those savings. Over your lifetime, that could really add up.

  2. It’s generic insurance cover
    The default cover through your super fund is providing you with basic cover and the amount is usually based on your age. That may not be enough for your circumstances and needs. And the cover is usually limited. If you want something more tailored or a higher level of cover you might want to apply for additional cover. You also won’t be able to get critical illness (trauma) cover through your super fund so you’ll need to go outside of super if you want it.

  3. If you overlook notices from your super fund your cover could end accidentally 
    Imagine falling seriously ill, only to find out that you missed the reminders about your inactive account and your insurance  was cancelled because your super account was deemed ‘inactive’. It seems far fetched, but it does happen. We cover this very important topic in more detail below.

A caution about insurance through super 

It’s pretty likely that you have more than one super account. It’s so common in fact, that there have been campaigns by the ATO to find your lost super. The most important thing to know about insurance within super, is that your cover can stop if your account becomes inactive. 

Let’s say you change super funds and stop contributing to your old account. Super funds are required by law to cancel all insurance on accounts that haven’t received a contribution or rollover within16 months. It helps save your inactive account from dwindling away through insurance fees, but it means you could be under insured if you don’t stay on top of things. The good news is that you can fill out a single form to tell your fund not to cancel your cover – but you must do this before reaching 16 months.

Your insurance options outside of super

Of course you don’t have to go through your super fund for insurance. You’ve got two other options:

  • Going direct with an insurance company – if you’re feeling adventurous and willing to do some legwork, you can go directly to insurance companies – or insurance comparison websites – and shop around for alternatives. Be warned, insurance policies are complex and varied. To properly compare products, you’ll need to be prepared to invest some time to really understand what’s included in each one. 
  • Get help from a financial adviser – if you’re keen to make sure you have the right cover and analytics isn’t your strong point, you can get help from a financial adviser to find a good match for your situation. This will certainly save you time, but comes at a price. The fee you’ll pay the financial adviser might be an up-front fee, or they may charge you commission which will bump up the cost of your insurance policy. Any adviser will tell you what these costs are before you sign up.

If you’ve got questions about insurance in your super, you can get help from our team.

Find a financial adviser near me.

Five steps to getting your insurance organised

The best way to check what you already have and don’t have, is to log into your online account or call your super fund. Your super annual statement and Product Disclosure Statement (PDS) may have information on the type and amount of cover you have, when it will pay out and how much your monthly premiums are. If you have more than one super fund, get onto this pronto. You might be paying double, triple of more than you need to on insurance fees.

If you haven’t got insurance, ask your super fund it they have an online calculator to help you work out what your premiums would be. 

Once you’ve got a good handle on what you can get through your super fund, see how the insurance cover and fees stack up by going direct to insurance companies. Or you can obviously skip this step if you’ve already decided to opt for insurance through your super fund. 
If your priority is to take out insurance cover with no impact to your cash flow, insurance through your super fund might be the way to go. But if you’re looking to get the best possible cover for you, it could be worth considering if the insurance options through super are going to work for you. Cover in super has to align with super laws, whilst cover outside can offer a wider range of conditions under which the policy will pay out. 
Now you’ve got the facts, it’s time to decide what insurance cover is right for you. In most cases the application process is straightforward. Unless you have a certain type of pre-existing condition or are looking for cover that’s above $1,000,000, you may not need to do a blood test or medical. It’s likely you’ll just have to fill in a form and tell them about your current state of health. Make sure you remember to tell them everything – your cover won’t be valid if the insurance company find out about a pre-existing condition you haven’t declared.    

It’s a good idea to review insurance cover every year and particularly when your circumstances change. You’ll want to make sure the numbers still stack up.

Like most things, the more you put in, the more you get out. Take the time to explore your options and understand what you’re getting for your money. Your future self will thank you for it. 


Fees for default insurance through my super fund is ...

Did you know?

You can’t get critical illness (trauma) cover through your super fund. You’ll need to look outside of super for that. 

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