Having Life Insurance through your superannuation account can be a lucrative option, especially when it can be (but not always) cheaper and easier (you face no out-of-pocket expenses). But one of the pitfalls of holding your insurance within a super account is the extra complications of the claims process.
If you currently hold your insurance through super, or are thinking about it, look at our list of things to consider when making a claim to help inform your purchasing decision.
There can sometimes be a bit of confusion when your super fund owns your Life Insurance policy. A lot of people assume they need to contact their super company first. But you need to begin the claims process with your insurance policy provider.
If you’ve purchased insurance through your super account, you’ll want to make sure you know exactly who your policy provider is. You should pass this information on to a trusted friend or family member so they know where to go if they need to make a claim.
Of course, if you’ve purchased your insurance through Wealth Smart, we’ll be your main point of contact for all your claim needs, and we’ll handle contact with both your insurance provider and your super company.
The main downfall of buying insurance through super is the fact that it can be a bit of lengthy process, with your super fund becoming a middle man between you and your insurance pay out.
With your insurance held through your superannuation, you’ll need to satisfy the claim criteria of both your insurance company and your super fund. This is where a bit of a delay can come in.
This is especially important when it comes to Income Protection or TPD claims. You could meet the conditions of your policy provider. But you may still have to wait until your super company approves the claim before you see any money. And that ultimately means delays in receiving your benefit.
A key issue Aussies face with insurance through super is the difficulty in guaranteeing a binding beneficiary: you may not have complete control over who receives your claim.
This can get tricky for families dealing with your death. The default beneficiary might not be your intended beneficiary.
The super fund trustee has ultimately decides who receives your benefit. This often means all potential beneficiaries, whether nominated or not, must express interest in receiving the payout.
There are lots of other things to consider when choosing between insurance through super or an individual retail policy. You’ll have to analyse levels of cover, the ability to personalise your policy, beneficiaries and much more.
There may also be some tax considerations to consider as tax may be payable on some benefits.
For more information on insurance through super and retail policies, check out our comparison of the two on our blog. If you’re ready to learn more about creating a policy, get in touch with a Wealth Smart expert who can provide you with more tailored advice for your needs.