9 October 2012

Don’t Lose Your Insurance When You Change Superannuation Fund

Just because you are unhappy with the investment returns, this is no reason to put you or your family’s future at risk by losing your insurance cover in the process of changing superannuation funds.

A good professional financial planner will assess your insurance needs before changing superannuation funds.

Ok, so you have decided to move to a new superannuation fund that you feel better meets your needs and might have more options or lower fees. That’s fine, but one of the things you should look at doing is protecting any insurance cover you have in your current superannuation fund. You can keep some money in your current fund to pay for ongoing insurance premiums or take out replacement insurance cover in the new fund.

Why address insurance before transferring your superannuation?

  1. It may be too late once you have rolled your funds, so you should assess your insurance needs before moving.
  2. Your existing fund may have been underwritten (priced and medically assessed) under Group terms which are more competitive and relaxed than stand alone policies. If you can keep a low balance in that fund to cover premiums you may save considerable money over time.
  3. Your health may have changed since you took out the cover and you may not be able to replace the insurance.
  4. You may now be self-employed or in a more dangerous occupation ( e.g. Miner) and may not be able to get cover for your new occupation or restricted cover. Some insurers restrict cover for those working from home under Income Protection policies.
  5. It may have been a number of years since you took out the cover and the rates for someone being re-underwritten at your current age may be considerably higher than those you receive because you have been an ongoing insured person.

So what can you do to maintain your Insurance cover when transferring funds

  1. Get a comparative quote for a replacement cover in your new fund
  2. You could leave enough money in your current fund in a cash option to cover the next 3 years premiums. When you review your needs in later years you can either rollback some more funds to cover the insurances or seek alternative arrangements in the meantime.
  3. If you are moving to another fund then look for “Transfer Terms” where a new insurer may accept the transfer of the cover without going through the full underwriting process.

While you are doing a review you should take the time to consider options like Level Premiums, placing cover outside of Superannuation or splitting the cover.

Not sure why you need cover or what types of cover you need?

Read our guide “How important is your peace of mind” and contact NextGen Wealth Solutions for a review of your insurance and superannuation options.

We hope this guidance has been helpful and please take the time to comment. Feedback always appreciated. Please reblog, retweet or “like us” on Facebook etc . As always please contact us if you want to look at your own options. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or online via Skype.

Verante Pty Ltd is a Corporate Authorised Representative of Viridian Select Pty Ltd, ABN 41 621 447 345, AFSL 515762. This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information consider its appropriateness, having regard to your objectives, financial situation and needs.