Risks of superannuation fund policies
Unfortunately for consumers, industry superannuation funds do not specialise in insurance and do not always provide a dependable or compelling insurance solution. Insurance is often a convenient add-on for large superannuation firms, but this can cause risks - policy holders may not receive the proceeds from a claim or the amount is less than expected or wanted.
While insurance provided by industry superannuation funds may appear cost effective, this is often due to the limited coverage of the policies involved. The personal and medical information requested by the superannuation fund is limited or brief, the costs are cheap and in line with the level of cover given under a ‘default’ arrangement.
Potential pitfalls
We have seen first hand that some of the largest industry funds are unlikley to provide salary continuance (ie. income protection) for up to a maximum of two years. They can and will payout a disability lump sum because that is more efficent for them to do, losing the future income stream, albeit only for two years.
Further, if your contributions stop after 12 months (due to ill health or injury), the trustee may not even meet your claim depending on the fund as they are all different and set their own conditions.
Typically default cover is not enough to cover your debts and help meet a satisfactory cost of living. It may not be appropriate to have an insurance strategy linked to your superannuation just because it is simply affordable.
We accept the industry fund place and their role in the superannuation industry, but if you are serious (as we are) about covering yourself, your income or family situation; insurance that is strategic and tailored to your personal situation can also be affordable.
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