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Insurance through super: is it right for you?

Taking out insurance through a super fund can be a great option for some members, but it does also come with some pitfalls.

Most super funds provide their members with insurance options and an option to increase, decrease or cancel your default insurance cover. There are many benefits of taking out insurance through super, which include:
– the ability to purchase policies in bulk
– not having to pay for premiums with your take-home income
– the convenience of having your policy managed for you
– most policies in super tend to be pre-approved, meaning there is no need for interviews or medical check-ups
– life insurance inside super is deductible to the fund at 15 per cent annually; whereas life insurance premiums held outside of super are not tax deductible.

However, there are some pitfalls of holding insurance through your super, including:
– there is generally a limit on the payout that can be received from an insurance policy purchased by a super fund. In public funds, it is usually between $100,000 and $200,000. For some people, this amount may be more than enough. However, if you have dependents and a mortgage, it may be insufficient to look after your loved ones should something happen to you.
– the types of insurance and levels of cover are limited
– typically insurance cover rises after reaching 50 years – taking a large chunk of contributions
– life insurance coverage ends when you reach a certain age (usually 65 or 70); policies outside of super may cover you for longer

Anyone using a super fund to provide insurance should ensure that they have an appropriate death benefit nomination in place that specifies who their super will go to in the event of their death. If you nominate a non-tax dependent as the beneficiary then they might end up with a hefty tax bill in the event of a lump sum payout (whereas, life insurance payouts outside of super tend to be tax-free).

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Understanding various kinds of super fees

February 16, 2018

No matter the kind of superfund you opt for, you will be subject to super fees. Understanding how these fees work and the difference they can make to your next egg is vital.

When it comes to superfund fees, there are two factors you need to get your head around; the kinds of fees you are being charged and the rate of fees you pay. Opting for a superfund based on these two factors can see you retire with hundreds of thousands more money.

You should be aware of the various types of fees you are being charged. If you would like to find out the fees you are being charged, you should do two things. Firstly, Google your fund’s product disclosure statement and scroll through to the fees section. You should see a list of different types of fees, with an explanation of what they are, how they are applied, and how often they will be incurred. Secondly, you should log in to your superfund account and take note of all the fees being charged to you. Investigate how closely these correspond and correlate with the product disclosure statement.

If you feel there are discrepancies, do not hesitate to contact your superfund or financial advisor and ask for clarification. It is worthwhile doing your research and comparing the fees you are being charged against other super funds and what they charge. Being complacent and not paying attention to your super is extremely irresponsible; the dividends you will receive later in life for being diligent now outweighs the burden of taking time to be informed today.

Some of the common super fees across the board include:

Another major factor contributing to how much you accumulate in your super account throughout your working life is the rate of fees you pay. Plain and simple, some funds offer much lower fees than other, creating a difference of hundreds of thousands of dollars when it comes time to retire.

Generally, funds are categorised into three groups; low super fees, medium super fees and high super fees. Ultimately, you want to be in a fund that charges low super fees. In saying this, it’s not only about super fees, as some funds have medium-high super fees but also perform better based on investment strategy, meaning you will get more back from your investments.