Real Wealth opinon
Posted April 4th, 2016 at 11:11 AM by David Orth
Just like dentists, doctors and work - insurance is a necessary evil. In most industries there are companies profiting when consumers are uneducated. It may surprise you that a lot of us pay for 2 identical insurance policies – one inside super and one outside super.
A majority of super funds come with a basic level of insurance. Let us be very clear – these are common insurance policies that most people already pay for outside your super. Most super funds have 3 levels of insurance: death cover (life insurance), Total and Permanent Disability (TPD) and income protection. This means if you’ve got a super fund, then you’re probably insured to some extent.
If you’re currently paying insurance outside your super, there may be a chance you’re doubling up. In addition to this if you’ve changed jobs, moved house or changed names there’s a good chance that you’ve got more than one super fund – and paying for insurance on each additional fund that you have. We had a client who had 14 different super funds - most of them had the same insurances.
According to the quarterly general insurance performance statistics released by APRA in December 2015, insurance companies have taken a massive hit right where it hurts – profits. This is most likely due to increased competition and more severe weather events.
According to the report, the general insurance industry NET profit went from 4,120 million in Dec 14 to 2,383 million in December 2015. We’re playing the world’s smallest violin just for them.
So how much of the 2,383 million in profit is contributed via insurance in super? How many duplicate policies do Australians hold? The answer to these questions is- we have no idea and probably never will.
Your default insurance policies are usually disclosed to you via the Product Disclosure Statement (PDS) supplied to you when you first join a super fund. They’re far from a thrilling read. Even though they contain important information, PDS’s are comparable to accepting the terms and conditions before installing apps and software - 1 in 10,000 would read them fully.
The bottom line is a lot of Australians could save a lot of money by not paying for the same policies inside and outside super. If you choose to pay your insurance inside or outside of super, each has its Pros and Cons.
The best place to start is to find out what super you have, consolidate it if you’ve got multiple policies then discuss insurance with someone that knows the pros and cons of structuring your insurance either inside or outside your super.