Posted on 22 Jun. 2015
It doesn't pay to be underinsured
By Slater and Gordon
You wouldn’t dream of driving out of the car dealership with your shiny new car without having considered insurance for your prized possession, so why do many of us not consider insurance to protect our ability to earn a living?
Like our cars, our incomes are worth protecting. The last thing we want is for something to happen which could result in a bad financial surprise.
Surprisingly, not many Australians consider life, income or trauma protection nor do they realise they can access insurance through their superannuation funds if they’re suddenly no longer able to work.
If you're no longer able to earn an income, how would you and your family survive?
Underinsurance is a widespread problem in Australia. Many Australians have no life or disability insurance at all, and many others rely on the default insurance cover they get through their superannuation fund which is often inadequate. Most people are unaware they have insurance at all let alone the amount of insurance they have.
If you have set up a self-managed superannuation fund, have you also taken out an insurance policy in case something happens which prevents you from working?
I speak to many people who are unable to return to the workplace for a number of reasons. For the vast majority, the insurance cover they have is nowhere near enough to replace the income they will lose if they cannot work.
It pays to check how much insurance you have and to consider whether you and your family would be adequately covered by an insurance payment if disaster struck.
So what type of insurance is available for workers?
Income protection Insurance:
Income protection insurance covers workers who are unable to return to work, usually because something happened out of the blue. About 75% of a workers’ income will be covered up to a period of two years, up to the age of 65. Income protection insurance is available through privately held insurance policies issued by insurance companies or superannuation funds.
Total and Permanent Disability (“TPD”) Insurance:
Most superannuation funds provide TPD cover. It provides a lump sum to those who are unable to continue working, even if the reason is not related to their work.
Trauma insurance can be arranged through an insurer or superannuation fund and provides coverage for specific medical conditions like stroke, heart attack or cancer or certain types of surgeries. It is usually paid as a lump sum.
This is general advice. Please consult your insurance broker or superannuation fund to find the best insurance cover for you. Check the fine print as exclusions, limitations conditions apply. If you ever need to make an insurance claim, apply early and seek independent legal advice.
For more information, visit out Superannuation and Insurance services.
Follow Annemarie on Twitter: @SuperLawyerSG.
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