Even the best-laid investment plans can come undone if you lose your ability to earn an income, or your loved ones are faced with your unexpected passing. The Macquarie Superannuation Plan (‘the Fund’) provides members with access to a range of insurance cover options through multiple insurance providers. Depending on your situation, having insurance in place can give you peace of mind that you and your dependents will be looked after if something unexpected happens to you.
Types of cover
The types of cover available within the Fund are:
life insurance (also referred to as death cover), provides a lump sum (also called a ‘death benefit’) if you pass away or are diagnosed with a terminal illness
total and permanent disability (TPD) insurance, provides a lump sum if you suffer total and permanent disablement
disability income (also referred to as income protection insurance), provides a benefit to replace income if you’re unable to work due to illness or injury, for longer than the specified waiting period.
Life insurance
Life insurance is like a safety net for your loved ones. If you pass away, it provides a sum of money to your dependents to help cover things like a mortgage, bills and daily living costs. The money goes to the people you nominate as beneficiaries of your super account. If you don’t have a valid beneficiary nomination in place, the trustee of the Fund will pay the death benefit to your legal personal representative who will distribute your account balance as part of your estate assets.
If you're diagnosed with a terminal illness and have a limited life expectancy, you may be eligible to have your death benefit paid out early to provide immediate financial support for you and your family.
Total and permanent disability (TPD) insurance
If you get seriously and permanently injured or sick and are unable to return to work, TPD insurance pays a lump sum of money. This can help pay for medical costs, living expenses, or whatever else you need to improve the quality of your life.
TPD insurance can be linked to Death insurance or selected as stand-alone cover.
All TPD policies obtained through super must align with the ‘permanent incapacity’ way in which you can access your super.
Broadly this requires you to be unlikely to work again in any job you’re qualified to do based on your education, training and experience
Note: Policies taken out before 1 July 2014 may contain a definition that is more closely aligned with you being unable to perform the job you were doing before your disability.
Disability income insurance
If you're sick or injured and temporarily can't work, disability income insurance may provide you with a regular monthly payment that is based on a portion (usually up to 70 per cent) of your income. This helps you meet living expenses and keep up with bills while you focus on getting better.
Waiting period
Each disability income policy has a specified amount of time you must wait before your disability income payments start. You may be able to choose a longer waiting period, which can make the premiums for the policy cheaper. However, it’s important to consider how much sick leave and annual leave you have, and whether you have any savings or emergency funds that could be used to pay for your expenses during the waiting period.
Benefit period
How long you'll receive payments depends on the nominated benefit period and how long you’re unwell. Longer benefit periods offer more protection but typically cost more.
Most policies offer a benefit period of two or five years, or up to a specific age (for example 65).
Insurance premiums
There are generally two types of premiums:
stepped premiums – this means your cover gets more expensive as you get older, because the chance of a claim increases.
level premiums – this means your premiums start off higher, when compared to stepped premiums, but don't jump up as much over time.
Regardless of which premium type you choose, premiums are not guaranteed and may change periodically. It's important to check your policy and anniversary statements or ask your insurer or financial adviser for details.
Benefits of holding insurance through your super account
Maintaining your insurance through your super account allows you to pay premiums from your super balance, rather than from your take-home pay or personal savings. This may have a tax benefit as the Fund may be able to claim a tax deduction. Premiums can be deducted automatically on a frequency that works for you.
You and your adviser will also have online access to the type, level and cost of insurance, so you can regularly review the insurance cover you’ve selected and ensure that it remains appropriate to your needs. This information will be integrated with other reporting we provide on your superaccount and investments.
Your insurance details will be displayed on your annual statements, and you can track the premiums that have been paid to your insurer.
Risks of holding insurance through super
There are risks you should consider before deciding to hold insurance through super, including:
an insurance benefit paid through super is a super benefit for tax purposes and may be subject to more tax than would otherwise apply if the benefit was paid from the same insurance held outside of super
limits apply to the amount you can contribute to super each year and super contributions you make to pay premiums will count towards your super contributions cap, reducing the amounts you may be able to contribute to super for retirement savings purposes
using your super to pay the premiums for insurance in super will reduce your retirement savings so you may have less available to you on retirement than otherwise may have been the case, and
taxation or superannuation law may change in the future, altering the suitability of holding insurance in super.
How much cover do you need?
It’s very important that you understand the value of insurance and choose an adequate level of insurance to cover your needs.
A licensed adviser can discuss this with you and tailor a package of insurance cover based on your individual circumstances. They can explain:
the benefit of estate planning options, including nominating beneficiaries
the tax treatment of insurance premiums and benefits paid from the Fund, and
the benefit of arranging insurance through a super fund.
How much will it cost?
The cost of insurance cover may be determined by a combination of factors including:
the type of cover
the premium type and payment frequency
the level of cover and options you choose
your age (premiums generally increase with age)
your gender
your smoking status (premiums are generally higher for smokers)
your medical history
your general health
your occupation, and
your pastimes and pursuits.
Your premium will generally be calculated at the cover start date and then on each subsequent anniversary, based on the above factors.
Once insurance has started, premiums will be deducted from your super account.
Applying for insurance within your super account
Before you decide
For detailed information on insurance cover available through your account, you should read the relevant insurer’s product disclosure statements. These documents explain the features and benefits in full and help you decide whether to take out insurance through super.
How to apply
To take out a new insurance policy within the Fund, you need to have an adviser linked to your super account.
If you have an existing underwritten policy, your adviser will help to determine if you can transfer the policy to the Fund.
Claiming an insurance benefit
Any payment of an insurance benefit depends on the insurer accepting your claim. If they accept it, they’ll pay the benefit to the Fund. To receive the benefit from the Fund, you need to meet a ‘condition of release’ under superannuation law. It’s important to understand that there may be circumstances in which the trustee of the Fund will be unable to release the benefit at the time of claim.
You can read more in the article When and how can I access my super?
