Equity Mates Facebook Discussion Group<\/a> \u2013 where listeners swap ideas and answer each other\u2019s questions. <\/p>\nOne listener, Mat, posted a notice from Australian Super outlining changes to insurance premiums. <\/p>\n
Life insurance premiums were up 20 per cent.<\/p>\n
TPD (Total permanent disability) premiums were up 40 per cent. <\/p>\n
Forty per cent. In a year. <\/p>\n
That\u2019s not a rounding error. That\u2019s a wake up call. <\/p>\n
Because while rising premiums are painful, there is a more uncomfortable fact hiding in most Australians\u2019 Superannuation insurance policies. <\/p>\n
Most of us aren\u2019t adequately insured in the first place. <\/p>\n
Many Australians are underinsured <\/p>\n
When we first sign up to superannuation, often we\u2019ll tick a box for life, TPD and income protection insurance. Or it\u2019s selected for us by default. <\/p>\n
Then we never think about it again. <\/p>\n
It creates a false sense of security. We think we\u2019re covered if anything goes wrong. <\/p>\n
The problem is, it isn\u2019t nearly enough. <\/p>\n
According to MLC, around 60 per cent of Australian parents with dependent children don\u2019t have enough life insurance to support their family for more than one year.<\/p>\n
Research from Rice Warner found that the insurance cover held across Australia is sufficient to only meet 29 per cent of TPD needs. <\/p>\n
Rice Warner separately found that the median default cover of a typical Super fund only meets 65-70 per cent of death cover needs for the average Australian household. <\/p>\n
The Financial Services Council estimates that around 1 million Australians are underinsured for Death and TPD insurance and 3.4 million Australians are underinsured for income protection insurance. <\/p>\n
My reality check<\/p>\n
I used to think I was fine.<\/p>\n
Looking at my Super, I had $250,000 in life insurance and $250,000 in TPD cover. <\/p>\n
That sounded like a lot.<\/p>\n
Then we interviewed Phil Thompson from Skye Wealth on the Equity Mates Investing podcast.<\/p>\n
He asked a few very simple questions:<\/p>\n
\u2022 How much is your mortgage? (More than $250k)<\/p>\n
\u2022 If you couldn\u2019t work again, how much would your family need to live? (More than $250k)<\/p>\n
It didn\u2019t take long to realise $250,000 wouldn\u2019t go far. <\/p>\n
Now, I\u2019m not alone. <\/p>\n
The Association of Superannuation Funds Australia (ASFA) reports that 71 per cent of Australians with insurance through super are on the default cover. <\/p>\n
And according to the ASFA the average sum insured is $228,000. <\/p>\n
In 2020, Rice Warner did some modelling for the basic level of death and TPD cover for the average Australian. <\/p>\n
It found for young parents, both aged 30, the basic level of death cover required is $561,000 each.<\/p>\n
It is important to note that your insurance needs will be dependent on your personal financial circumstances, family situation and huge number of other factors. <\/p>\n
But these averages reinforce the key point: for many of us, default insurance cover in super isn\u2019t enough. <\/p>\n
You have more choice than you think<\/p>\n
One of the biggest misconceptions in Australia is that you\u2019re stuck with whatever insurance your super fund gives you.<\/p>\n
You\u2019re not. <\/p>\n
You can change the default level of cover your super fund gives you. <\/p>\n
You can choose your insurer, your level of cover, a structure that suits your needs and still have premiums paid from your super balance. <\/p>\n
Now there is some complexity with getting it set up. <\/p>\n
You can speak to your super fund directly, but I would suggest getting an independent third-party to look at it and speaking to a financial adviser. <\/p>\n
Because, as Phil explained, when Australians upgrade from default cover in super, \u201cmost of the time the policies through the super fund are more expensive than the same underlying insurance provider going through an adviser.\u201d<\/p>\n
What every Australian can do <\/p>\n
Here\u2019s the uncomfortable truth: insurance is one of those things you don\u2019t think about until it\u2019s too late.<\/p>\n
But it\u2019s also one of the most important things we can do to manage the risk of something going wrong in our life. <\/p>\n
Even if you think you have insurance through your super, it is important to check it periodically. <\/p>\n
So take five minutes. Log into your Super.<\/p>\n
Check what you\u2019re covered for and ask yourself one simple question: would this actually be enough if something went wrong? <\/p>\n
DISCLAIMER: Information and opinions provided in this column are general in nature and have been prepared for educational purposes only. Always seek personal financial advice tailored to your specific needs before making financial and investment decisions.<\/p>\n
Read related topics:Value Vault | Money Saving Tips & Cost of Living News<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"I saw a screenshot that shocked me last week. It was shared in the Equity Mates Facebook Discussion…\n","protected":false},"author":2,"featured_media":401055,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[72,176,61,60,174,175],"class_list":["post-401054","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-finance","tag-ie","tag-ireland","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/401054","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=401054"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/401054\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/401055"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=401054"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=401054"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=401054"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}