3. Critical Illness (also known as Trauma) – provides a lump sum of money on diagnosis or occurrence of a number of specific illnesses or injuries, e.g. cancer, stroke
These ‘lump sum’ insurances are flexible – you can choose the amount of cover you have. You can also have multiple policies; as long as you meet the criteria for making a claim, each policy would pay out the benefit.
4. Income Protection (IP) (also known as Salary Continuance cover) – provides a monthly benefit, while you are unable to work due to illness or injury.
- There is a benefit period, which dictates for how long the insurer will pay benefits, until you can return to work
- There is also a waiting period, which is how long the insurer will wait before paying out any benefit
- Generally, the maximum amount you can receive as a benefit is 75% of your salary. This also means that only one policy would pay out if you have a claim, even if you have more than one policy. As such, it is usually not beneficial to have multiple policies – you may be paying multiple premiums for just one payout!
There are benefits in having your life insurance through super:
- It's often cheaper because super funds purchase insurance policies in bulk
- It's easy to manage because premiums are automatically deducted from your super account balance
- Some funds automatically accept you for cover without requiring a health check
However, you also need to be aware that:
- Tax may be payable on some benefits if your beneficiary is not a dependant
- If you do not make a binding beneficiary nomination, the super fund trustee will decide who gets your benefits when you die
- Life insurance coverage through super ends when you reach a certain age (usually 65 or 70); policies outside of super may cover you for longer.
- Insurance premiums are deducted from your super balance, reducing the money available for your retirement.
There can also be benefits when you have insurance cover outside of super:
- You can select the cost-structure of your premium, e.g. stepped vs level premium
- You can choose policy features that may not be available through super
Death, TPD and IP can be held through super, or in a policy outside of super. Critical Illness cover can only be held in a policy outside of super.
It is important to check the insurance coverage you receive as part of your employer’s benefit package. Many super funds also provide automatic insurance cover – you may have coverage and don’t know it!
Is your insurance coverage enough? Does it cover all of your – and your family’s – needs?
To discuss your insurance plans with us, get in touch today.
