Life insurance within superannuation funds has continued to remain affordable despite some large increases in premiums, according to SuperRatings, which has argued this type of insurance is still relatively cheap for the average worker.
The research provider has stated that while the median increase for Death and Total and Permanent Disablement (TPD) premiums has been around 50% in the past 12 months life insurance through a superannuation fund insurance continues to be affordable for the average superannuation fund member.
SuperRatings stated that while the average increase in premiums for Death and TPD cover over the past four years has ranged from 29% to 45.1% for Not for Profit funds the affordability of those premiums needs to be measured in conjunction with the fulltime adult weekly total earnings and the level of superannuation contribution actually going into superannuation.
“Taking personal tax considerations aside, affordability can also be measured by the fulltime adult weekly total earnings of $1,449.30 ($75,364 p.a. based upon the latest Australian Bureau of Statistics (“ABS”) statistics,” SuperRatings said.
“Based upon SuperRatings analysis, the average Death and TPD insurance annual premium of $239 for a 40 year old and $243 for a 45 year old equates to approximately 3.3% and 3.4% (respectively) of the Superannuation Guarantee (“SG”) contribution for the average Australian worker, resulting in a net contribution to superannuation of more than 95% of the SG contribution into a members account.”
“…default insurance continues to be affordable for the average superannuation fund member”
“This suggests that default insurance continues to be affordable for the average superannuation fund member,” SuperRatings stated.
The research group also found that superannuation funds with a focus on a specific sector were better able to target their insurance benefits to their membership.
At the same time SuperRatings found that larger funds, with highly diversified memberships, carried the cost of higher premium increases in comparison to the smaller, sector specific funds “…showing that pure size is not always of benefit when it comes to competitive insurance premiums”.
“Based upon SuperRatings analysis, the average Death and TPD insurance annual premium of $239 for a 40 year old and $243 for a 45 year old….. “This suggests that default insurance continues to be affordable for the average superannuation fund member.”
This suggests nothing re affordability to me, my take away is a confirmation that the average 40 year old and 45 year old are grossly under insured. If I insured my car for third party damage only, it may cost far less, but If i have any kind of accident, I’d be suffering financially. When a claim is made and they are left hundreds of thousands of dollars short or still have to sell the family home after receiving their paltry pay out, I doubt they would be saying “Hey, at least because my sums insured were so low, I was saving a few hundred dollars in my super fund each year”
Exactly !! I notice how the sums insured that are purchased for this are “magically? not include ! Or did I miss something.??
Reports that only tell half the story are not reports they are misleading and possibly deceptive.
If “Joe average: read this and looked at the cheapness of the figures he would more than likely run that way as he does not know about what he really needs as you can bet no one has helped him work it out
Ignorance by the consumer is the biggest issue leaning to the Underinsurance problem. We need educators who believe it or not are advisers! not bank staff or telephone sales people real advisers and people who genuinely care for the clients.
When will this truth ever be presented to government ? Never while the all mighty dollar takes precedence.
“This suggests that default insurance continues to be affordable for the average superannuation fund member,” SuperRatings stated.
Ehem….. no mention of changes to policy wording (that members are not aware of and may not be able to opt out of in favor of retail policy due to health issues) which by its very intention reduces potential claim payouts by the group insurers for TPD.
It is worth remembering that many of these funds have auto acceptance for their life cover. I know a number of people who have decided they should take advantage of this following bad news from their doctors. In fact given the law states we have a financial duty of care to our clients, it would seem we are obliged to make them aware of the fact.
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