The West Australian 7 June 2019
You’ll be making a serious mistake if you let your life insurance be cancelled before triple-checking that you have adequate cover.
Such a warning should be in 40-point type at the start of the tens of thousands of letters being sent out now by superannuation funds to members with inactive or modest accounts.
The stark warning is necessary to stop people with inactive super accounts unwittingly letting the Federal Government’s Protecting Your Super package destroy their life insurance.
But such a warning is unlikely to be given now that the Australian Securities and Investments Commission is baring its long-concealed teeth.
ASIC has sent out threatening notes to superannuation fund trustees warning it may take action against trustees if they break the law through misleading communication about the Protecting Your Super package.
Boasting about the warning, ASIC commissioner Danielle Press said a trustee communications with members about the changes gives us an “indication of the trustee’s commitment to members’ best interests”.
“It is not appropriate for trustees to encourage all members to maintain insurance — many members with inactive accounts will be better off allowing the insurance to lapse,” Ms Press said. “Similarly, trustees should not be urging all members with low-balance accounts to keep their account within the fund as this may not be in the best interests of members.”
Ms Press is, at best, only half right.
A trustee urging every member to stay with their fund would be a disgusting action deserving of prosecution to the full extent of the law.
But the notion that “many members with inactive accounts will be better off allowing the insurance to lapse” again sweeps aside a chronic problem that can make death and disability even more painful for Australian families.
Our nation’s chronic under-insurance was swept aside last year when the Federal Government unveiled its plans to have the Australian Taxation Office more aggressively close inactive super accounts.
Insurance for vulnerable, low-income Australians will be destroyed by Protecting Your Super closing inactive accounts below $6000.
Getting rid of multiple insurance policies is only a good idea if the person has adequate provisions in place for death, illness and disability.
Despite the default cover now targeted by Protecting Your Super having partially reduced the under-insurance problem, actuaries Rice Warner reckon 30-year-old Aussies with kids have less than one-third of the death cover needed.
And despite what Ms Press claims, many recipients of letters over the next few weeks will be far worse off if they lose their insurance.
WHAT YOU NEED TO DO
- If your super funds does not receive any contributions or rollovers for 16 consecutive months, you must notify your super fund that you have elected to keep the insurance in place.
- With most super funds, you can do this by logging into your account and following the links dealing with life insurance. Most funds have special links or pages dealing with you making an election to “keep my insurance” cover in place.
- If you don’t have a login or, you’re not sure what you need to do, call your super fund to find out. Make sure you have a recent super fund statement on hand to help identify you.
- You may make an election at any time. However, remember that the premiums for insurance will continue to be deducted from your account and, if the funds run low, the insurance might be cancelled. You may need to top the fund up to ensure the cover remains in place.
- You could also look to consolidate your funds. In this case, you may be able to transfer the life insurance cover across to a new fund but make sure that is possible before you close the old fund down.