How To Get Cheap Life Insurance Through Superannuation
Have you ever wondered whether you are really getting value out of your life insurance in your superannuation account?
If this is you, or if you are just wondering whether you are getting the best possible deal, then you definitely need to read this article. Life insurance can be expensive given it is something you generally pay for the entirety of your working life, so it is worth checking you are getting the best deal possible.
In Australia there are two key ways of getting insurance, the first is through your superannuation and the second is directly through the insurer. Today we will show you how to get cheap life insurance through your superannuation.
Life Insurance in Superannuation
Most Australians have some form of personal insurance cover through their superannuation and the reason is primarily because it is quick, easy and convenient.
You may start a new job and while you are filling out a stack of forms for them, you fill out those for your new superannuation plan as well. Tucked into this is all the information needed for your insurance.
It is pretty easy, and as a result you end up with your life insurance and other types of insurance if requested, through your superannuation account. There are generally no other forms to fill out, no extensive health questionnaires to complete and no medical appointments to attend. Why?
Life insurance in superannuation is provided as part of a Group policy, that is the insurer is giving insurance to a group of people. The larger this group, the lower the risk, because it is spread over a greater number of people. This means the cost comes down. There are also two key things about Group insurance, you generally have to be at work on the day you are due to start working and you have to join straight away. These tell the insurer that you were healthy on the day you joined.
As a result the insurer does away with administrative tasks like questionnaires and health checks (except for those who want higher cover or represent significant risk) and allows everyone to join.
This means you should have cheap life insurance, right?
A Cut of the Pie
Not necessarily, the problem is that superannuation funds may include a commission, fee or rebate on their insurance.
Often it is not you who pays the fee, but the insurer; however, it will affect the cost of your premium, because a part of the money you pay, will be paid back to the trustee of the superannuation fund.
In addition it is not just the superannuation fund that may be taking a cut, if you have a financial adviser; it is likely they also are receiving a percentage of your insurance premium too.
Find Out What You Are Paying
All fees in a superannuation fund must be disclosed to you, so request a copy of your Superannuation Product Disclosure Statement. Insurance fees can be located in a few areas, check the fees section, the insurance section, and any part of the document that talks about money paid to the Trustee.
Many funds charge about 5-10%, this is normal and usually unavoidable, but look out for funds that charge more. In addition, if you find reference to an adviser commission on your insurance, ring the superannuation fund and find out exactly how much this is, then talk to your adviser and see whether it can be reduced.
Do a Comparison
There are many insurance brokers in Australia who will provide you with an online insurance quote and a life insurance comparison. This will tell you what the insurers would charge you if you were to get insurance from them directly.
However dont act hastily.
Life insurance through superannuation has two significant advantages, the first is you physically dont need to come up with the money each month for the premiums, and the second is that your contributions into your superannuation are tax deductible, which means you may pay less tax than you would if you were to receive that money direct from your employer and then pay it to the insurer.
If it looks like you are paying too much, consider getting financial advice before you act.
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