Income protection insurance offered within a group life scheme runs the risk of being a second-rate product due to inadequate lengths and levels of cover, according to research group Rice Warner.<\/p>\n
In comments published on the group\u2019s website, Rice Warner stated that while group insurance was supplying basic levels of life insurance for more than 13.5 million Australians, superannuation funds will continue to struggle to supply income protection insurance that met the needs of fund members.<\/p>\n
Rice Warner stated that \u201cthe levels of cover are generally short-term (benefit periods of 2 years) and the sums insured don\u2019t provide full replacement of income\u201d and a critical test of whether a super fund\u2019s insurance is efficient is whether the cover is \u201cadequate\u201d and provided at a \u201creasonable\u201d cost.<\/p>\n
The group said it was difficult to efficiently offer income protection within superannuation due to the high cost of providing adequate levels of cover without eroding the retirement benefits of member\u2019s accounts.<\/p>\n
At the same time, most group income protection insurance arrangements are limited to providing benefit pay-out for two years instead of through to retirement and will not begin paying benefits if members are temporarily off work due to unemployment or maternity leave.<\/p>\n
Rice Warner stated this has the potential to result in members paying for cover without receiving a benefit, which would also apply to members who have income protection cover elsewhere and\/or receive Worker\u2019s Compensation which already pays the usual limit of income-protection benefits of up to 75% of their salary.<\/p>\n
The advisory group stated superannuation funds have no way of assessing the personal circumstances of a fund member to determine required levels of income protection cover and recommended fund members be provided with advice around income protection needs.<\/p>\n
\u201cWe believe funds can place more of an emphasis on educating and advising members, including through fund advisory groups, about how much income-protection cover is needed for their circumstances,\u201d Rice Warner stated.<\/p>\n
\u201cBy encouraging members to obtain advice about their income-protection needs is likely to have the additional benefit of more members seeking holistic advice regarding their overall circumstances,\u201d the group added.<\/p>\n
\u201cSuch advice would hopefully extend far beyond insurance issues to setting long-term goals, saving for retirement, setting asset allocation and diversification for portfolios, retirement-income planning and estate planning.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
Income protection insurance offered within a group life scheme runs the risk of being a second-rate product due to inadequate lengths and levels of cover, according to research group Rice Warner.<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,5622],"tags":[],"class_list":["post-35340","post","type-post","status-publish","format-standard","category-products","category-superannuation"],"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/35340","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/comments?post=35340"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/35340\/revisions"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=35340"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=35340"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=35340"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}