Don’t Lose Your Life Insurance!


Did you know that hundreds of people each day in Australia are unintentionally cancelling their life insurance!

How is this possible?  This is occurring due to the popularity and growth of self-managed super funds (SMSF’s).

An SMSF is basically a do it yourself superannuation fund that allows you to invest and save for retirement.

The purpose of an SMSF is no different to any other super fund however requires more of a hands on approach.

There is greater flexibility in relation to investing within your fund, however with this comes greater responsibility.

So what does all this have to do with losing your life insurance?

In order to start your own SMSF money is usually transferred over from an existing super fund.  In most scenarios it is usually a compulsory industry super fund from where the money is being transferred.

The whole account balance is usually transferred over as there is no real advantage in having two super funds in place.  This is where the first problem occurs.

I’m still amazed first of all by the number of industry super fund members that I come across who are unaware that they have insurance cover within their fund, namely life & TPD cover.

For the small percentage of members who are aware, they usually have no idea about both the type or level of cover held within their fund.

This means that it is impossible to review or consider the adequacy of your personal insurance cover when changing funds as most people are unaware that the cover exists in the first place!

A typical scenario, Mr & Mrs Smith have consulted with their accountant, adviser or SMSF specialist & have decided that they are happy to go ahead with their SMSF.

NOW is the time to ask the question!

Do I currently have any insurance within my super fund?  If so, what type & how much cover do I have?  The second problem now relates to cost or eligibility for new cover!

Before rolling over your account balance into your SMSF & therefore cancelling any insurance held within the fund, contact a risk adviser & do some homework in relation to your personal insurance options.

If you have any issues medically or are in your 50’s or 60’s, you may find that cover is not available for you or that if it is, it’s very expensive.

If this is the case it may pay to retain a small balance in your old super fund in order to keep it going purely to retain your insurance cover.

If on the other hand you are reasonably young & healthy & therefore qualify for new cover, you can transfer over your entire balance & therefore wind up your old fund with confidence.

Whatever the situation, the key is to review & discuss your personal insurance needs before commencing your new SMSF.

The good news is that life, TPD & income protection insurance is available & can be held within your SMSF.

Unlike your basic or default industry super cover, comprehensive cover is only available if you choose to take out your own cover, whether it is held inside or outside your super fund.

For this reason you need to plan ahead as factors like cost & medical history will play a part with your new cover compared with your old insurance within your industry fund.

Default levels of cover within industry super funds are issued without medical underwriting with the premiums being deducted straight from your account balance.

This may be the reason why so many members are unaware that they have cover in place as the process is automatic.

To summarise, if you are changing super funds or starting up your own SMSF it may also be a great time to consider your personal insurance options.

Please don’t hesitate to contact me or leave a comment below if you require further assistance or have any queries in relation to this topic.




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Tom George
My role as a Life Risk Adviser involves educating, assisting and providing advice in the area of personal insurance. Follow me on Twitter | Linked In Profile

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