By Brad Makivoy | July 27, 2017
Even if you never actually applied for it, chances are your hard-earned superannuation is being drained by payments for life insurance.
The worst part? The life insurance policy may not even be worth the paper it’s printed on.
You see, most super funds include life insurance policies structured on an opt-out basis. This basically means that unless you check the fine print and tell your fund you want to opt-out, your super fund will be automatically charging you for life insurance.
If this is the first you’ve heard of this, you’re not alone.
According to Senator John Williams, as many as five million Australians may actually have life insurance in their super and not even know it.
Some life insurance is better than none, but…
You should know that default super-funded life insurance policies may have a number of issues, and in recent years this has led to a lot of bad media coverage. A number of life insurance companies have come under fire after using technicalities in the fine print to avoid paying claims made on these policies.
The situation has gotten so bad that the government is now reviewing the whole system.
Do you have super in multiple funds?
If you do, you may actually be paying for life insurance in each of your funds. This means that all superannuation paid on the duplicate policy will be spent with no actual benefit to you.
If you’ve entered into a life insurance policy outside of your super, you may be in exactly the same situation. Paying for something for nothing.
The #1 takeaway
There is no arguing with the benefit of life insurance, it is an important safeguard that every person should have. This is exactly why it was originally built into most super funds. Unfortunately, as is often the case, it just hasn’t been executed well.
Fortunately, you are not tied into this life insurance policy. Just because your super fund has a default policy doesn’t mean you can’t look for a better deal and protection. The best part is that payments can continue to come out of your superannuation, never hitting your pocket. The end result is a better deal and tailored cover.
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