It is more important than ever that we educate super fund members about the value of default insurance within their fund, so that they can make informed decisions about their cover.
Life insurance offers a financial safety net when unforeseen events or tragic circumstances impact people’s lives. And while it’s one of those things people need, they don’t necessarily seek it out, or want to talk about it.
Insurance inside super offers an affordable alternative to those who would not otherwise be covered, helping to reduce underinsurance.
While life insurance had previously been automatically applied to an individual’s superannuation account on joining a fund, new laws mean that certain groups of people have to opt in to get insurance.
That’s why MetLife has released the Value of Life Insurance Report, a tool designed to help industry participants, like super funds, communicate more effectively with stakeholders about insurance.
The report outlines three important points super fund trustees can make to their members when discussing the value of life insurance inside superannuation.
More efficient than a savings strategy
Life insurance provides more effective financial support than an emergency savings strategy, which is generally insufficient for households where the main wage earner suffers premature death or incapacity early in their life.
Consider a 40-year-old non-smoker who wants to provide $500,000 of financial security for their dependents if they die. They would need to save over $15,000 a year for 20 years or $1,250 per month. Alternatively, this same person could obtain $500,000 worth of life insurance within their superannuation with insurance premiums automatically deducted from the superannuation balance1,2. And premiums are often cheaper than insurance bought direct as super funds purchase policies in bulk.
More adequate than social security benefits
A client may think they can rely on government support if something goes wrong. While Australia’s social security system can provide some relief to families who have lost their main income earner, or for individuals who are no longer able to work to their full capacity, it generally cannot maintain their standard of living.
Disability payments provided by the Government tend to be less than $500 a week (for someone over 21) or less than $26,000 a year3. Comparatively, income protection cover would deliver much greater value to the policy holder. MetLife Australia pays out on average $1,000 a week on IP claims, significantly more than what someone would receive in disability payments from the Government.
Less burden on the taxpayer
People without life cover, or who are underinsured, are more likely to draw on welfare payments which is a significant cost to the Australian taxpayer.
At present, there are approximately 750,000 people receiving disability benefits in Australia with the Government paying out $16.5 billion annually.
Life insurance provides an alternative, self-funded source of support that better suits the individual needs people are likely to have if they’ve been impacted by illness or injury.
The MetLife Insurance Inside Super Report found that while 73% of Australians are aware that they have life insurance inside super, only half claim to know how much cover they have and only 34% know what premium they are charged.
It is vital that we increase awareness of this important type of cover and the value it provides to individuals and beyond.
For more information, view the Report today.
- Canstar (2019) – “Benefits of having life insurance: Is it worth the costs?”
- Finder (2021) – “How much does life insurance cost in Australia?”
- Australian Government disability payment rates