Superannuation not only provides you with security when you retire, it often includes insurance. Understanding your insurance cover and what you’re paying for is important and mid-year is a good time to think about your cover and what you need for your situation in life.
Insurance through your super fund is a genuine benefit which protects your most important asset – you and your family. It should provide some peace of mind to members who are covered and, at a national level, it plugs some of the under-insurance gap in Australia.
Most industry funds do not self-insure; they outsource and provide what is called group insurance from a professional provider. As part of its due diligence and fiduciary duty, fund trustees search, negotiate and scrutinise insurance providers to ensure the best product, the best service and the best price for members under an insurance contract – group life and group salary continuance.
NGS Super’s selected insurer is a highly respected international insurer, TAL. Due to the size of the group insurance policies, the fund can provide insurance benefits to eligible members at a discounted price.
An insurer will look closely at the membership of the group to be insured – age, gender, nature of work, illness/injury history – and decide whether they will take the risk for the whole group and at what premium.
The insurer will set conditions such as “actively at work” and other criteria and, if acceptable, take the risk of insuring the group subject to the terms of the contract. This is often done without the need for individual medical examinations. Default insurance is provided to eligible members automatically to make it easy for members to obtain cover, but members can cancel their insurance at any time.
If cover is cancelled, a member may re-apply for it, but acceptance will be subject to approval by the insurer based on the medical information provided. Group insurance provided through a superannuation fund is complex and impossible to scope in a single article, but some simple points about how it works may be useful. If you want to learn more about the terms and conditions of your insurance, I recommend looking at NGS Super – Insurance Guide.
Life insurance
Life insurance can provide a lump sum if you die or become terminally ill. The cover is age-based according to units held and members can find the amount of cover on their annual member statements.
Levels of cover can also be found in the NGS online insurance section. It’s good to check this so you can be sure you have adequate cover. As a rule, financial planners recommend having at least enough cover to pay off your mortgage in the case of your death.
For example, NGS Select cover would insure a 40-year-old for $550,000 at a cost of $6.29 per week; a 50-year-old for $390,000 at a cost of $8.71 per week; and a 60-year-old for $50,000 at a cost of $3.22 per week.
As the cover is age based, it is designed to peak then decline as the member’s age increases.
The levels of cover and the costs are all disclosed in the NGS Insurance – Insurance Guide (Product Disclosure Statement) for members’ information. It’s good to have a look and take some time to understand how it works. If your cover is not enough to cover your needs, it is possible to increase or “dial up” the level of cover subject to the insurer’s approval, which will be based on medical information.
Use the TAL insurance portal to apply for an increase or decrease in your insurance cover. It is also possible to ‘fix’ your cover, again subject to acceptance by the insurer, so that the death benefit remains the same ‘fixed’, but the premiums increase annually.
Members can also have an automatic increase based on ‘life events’ such as marriage, birth of a child, divorce and several other categories. Again this depends on meeting the terms and conditions set in the Group Life Policy.
Total and permanent disability insurance
Total and permanent disability insurance (TPD) provides a lump sum if you are permanently unable to work due to illness or injury. This condition will have to be corroborated by medical evidence stating that the member will never be able to work again due to illness or injury.
Income protection insurance
Income protection (IP) insurance can provide you with an income if you are temporarily (or permanently) unable to work due to illness or injury. Default cover for NGS Select is for a two-year benefit payment period after a waiting period of 90 days.
It will provide a monthly income of up to 80 per cent of your pre-disability salary income, plus up to 10 per cent of pre-disability salary which will be paid as a super contribution. These figures are subject to a cap.
Again, you can change the waiting period, change the level of cover or reduce the cover as your work situation changes subject to the insurer’s acceptance. For a quote on how much any changes would cost you can use:ngssuper.com.au/calculators.
Valuable benefit
The provision of insurance through superannuation funds’ group policies is not a simple matter. However, it is a valuable benefit which has helped hundreds of thousands of super members and their families in times of illness, injury and death.
Think about your levels of cover, read the NGS Super – Insurance Guide if you have any questions, or better yet, contact the fund on 1300 133 177 or via e-mail (www.ngssuper.com.au).