Life Insurance & your Super
It's estimated that 70 percent of all Life insurance policies are bought through superannuation funds (Investment and Financial Services Association.)
However, if you were to measure the actual premiums paid in dollar terms, then this figure would drop to around 30 percent. That's because people taking out Life insurance through their super generally pay lower premiums and have less cover than those with stand-alone policies.
There can be tax advantages if you buy through your super, as you can pay the premiums out of your super contributions, although you will need to make sure you do not 'eat' too much into your funds future potential. You should also ensure that the beneficiaries of any policy are clearly stated as this can have quite large tax implications.
Insurance cover through a super fund is usually not as far-reaching as a stand-alone policy. With life cover in a group super scheme usually between $100,000 and $200,000 when in reality, you may need a higher amount to protect your family. Additionally Life insurance through super does not include trauma insurance which can be a valuable part of any full protection plan for most people.
As for income protection - If your super does offer it, and about 50 percent of funds don't - the maximum benefit is usually paid for two years. So if you are aged 40, your insurance benefit period will only provide replacement income until you are 42.
It is generally recommended that replacement income is provided through to the maximum age of 65.
Obviously some life cover is better than none, but it's good to check exactly what you are getting through your super. There is nothing to stop you taking out cover both through your super and independently and it may be better to have a balance.
iSelect's qualified financial planners will be able to make an assessment and provide you with the appropriate advice in this area.
