Prepare for life insurance changes ahead of super rule shake-up

Superannuation rules have been constantly changing for several years, but the latest tweaking threatens to create a big potential insurance problem for many Australians.

You may not know you have it, but losing your life insurance could create one of the most painful financial problems of your life.

Less than three months before more new superannuation rules kick in, Australians are being urged to check their super and the life insurance held inside it.

From July 1, people with inactive super accounts with balances below $6000 will have them automatically shut down and the money transferred by the Australian Taxation Office into one of their larger super accounts.

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This could lead to the cancellation of life insurance and disability cover that may be difficult to get back.

Integrity Life’s general manager of distribution, Suzie Brown, said under the new laws people who had not made a contribution or other changes to their account within 16 months would lose default life insurance as the account was consolidated.

Suzie Brown from Integrity Life

“If your health or circumstances have changed since you joined your super fund, or you are in a higher risk occupation, it might be more difficult to obtain the cover you lost,” she said.

Ms Brown said people could check their super accounts and find lost super by visiting my.gov.au and linking to the ATO.

“To check your insurance cover within your super, contact your super fund, check your annual statement or access your online account,” she said.

From May 1, super funds will be contacting members with inactive accounts.

“If you don’t respond, you will lose your insurance cover,” Ms Brown said.

Another looming change is making life insurance in super “opt-in” for new members under 25 or with low balances.

Planning for Prosperity senior adviser Bob Budreika said people should check their super funds for insurance and take control, even though he was “totally miffed” by the rules changing.

“I can’t believe how silly it is,” he said. “As a parent, if I had a 22-year-old who become incapacitated, who would pick up the tab if they have got no money? I will tell you: the Bank of Mum and Dad.

“They’re saying a person who is 20 will never have an accident, disability and never die in that (under-25) time frame. That’s like saying why would you have car insurance, and why would you have home insurance?”

@keanemoney