The three main types of insurance cover commonly available through superannuation are TPD, Income Protection, and Death or Terminal Illness cover.

There is no question that superannuation is a vital safety net for many Australians. And that safety net goes beyond the compulsory super contributions your employer pays while you are working. However, misconceptions remain about how insurance in super works. Here are some popular myths about insurance in super — exploded!

Myth 1: All Super Funds Include Insurance 

Reality:  Not all super funds provide insurance. While most retail and industry funds offer default insurance for TPD, income protection, and death benefits, some don’t. And even when they do, the coverage can be less than satisfactory.

If you are operating a self-managed super fund (SMSF), it is likely you won’t have insurance, unless the person who set up the SMSF (most likely your accountant or financial adviser) made these arrangements. And, if your job is hazardous, the default insurance offering may be less than you need if it comes to calling on your insurance. A simple call to your super fund can often fix this by increasing your cover. It’s essential to check your fund’s offerings to confirm your coverage.

Myth 2: If You’re Making Contributions, You’re Automatically Covered  

Reality:  Making super contributions does not guarantee insurance coverage. Some funds require members to opt in for cover, particularly if you are under 25 or have an account balance less than $6,000. Further, changing your working hours or working less than 15 hours can change your insurance benefits and change the policy definition you need to satisfy to run a claim.

Myth 3: Default Cover Is Always Enough 

Reality: (We are drifting into financial adviser territory here)…but default cover is often limited and may fall well short when you actually need to rely on it. The good news is that you can often sort this out with a simple call to your fund and increase your cover, sometimes without any medical examination. Benefit amounts can be low, and policy definitions may be restrictive, making it harder to claim. Assess your needs and consider increasing your cover if necessary.

Myth 4: You Can’t Claim TPD If You’re Receiving Other Benefits 

Reality: Receiving income protection benefits, workers’ compensation benefits, or a Disability Support Pension (DSP) does not disqualify you from claiming TPD insurance. Each of these benefits address different aspects of financial support, and you may be eligible for multiple claims.

Myth 5: Switching Super Funds Won’t Affect Your Insurance 

Reality:  Changing super funds can have significant consequences for your insurance cover. If you close your old account, you may lose your existing TPD and income protection policies. Always check the insurance offerings of your new fund and consider keeping your old account open to retain coverage.

The other reason to think twice before switching super funds is your health. Have you developed any health problems that could be excluded if you switch funds and take our new default cover? This is a massive consideration.

Understanding the truth behind these myths is crucial. Insurance in super can provide invaluable support during difficult times, but it’s important to review your coverage, understand your rights, and seek professional advice if needed.

There is, of course, much more to know than can be covered here, and the usual disclaimer applies: this is general information only, because legal advice always depends on your individual circumstances.

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