The insurance in your super can cost more

Most super funds come with standard insurance options, mainly cover death, total and permanent disability (TPD), some even offer income protection (IP). Generally based on your age they would give you certain amount of life, TPD and IP insurance as the default cover without any health requirements. These covers are normally called group insurance, simply means all the members of the fund in similar age groups will have same covers.

Such insurances are not free, the premiums are deducted from your super balance automatically. If you are young and in good health condition it is very likely that you have overpaid the premium without knowing it. Why? Nice and easy opt-in without medical requirements comes with costs. People with poor health condition can easily have insurance but they are more likely to make the claims down the track, as a result insurers have to lift up the premiums for all members due to higher business running costs, healthy members end up paying more.

Any better option available? Yes, personal insurance not only provides better and more flexible protections than group insurance, for healthy applicants, the costs are also lower. Personal insurance requires the disclosure of your detailed health and occupation information when setting it up. For people with health issues, the premium will be loaded or even rejected. The extra work at the beginning will provide financial benefits. Healthier members have less chance to make claims in the future, as a result, insurers can afford to offer lower premiums. The long-term savings are significant.

Is your insurance group cover or personal cover?