Last year’s Federal Budget announced a raft of reforms under the government’s Protecting Your Superannuation package.
Not all of the reforms have made it through parliament, but one that has could seriously impact your financial wellbeing.
From 1 July 2019 super funds won’t be able to automatically renew life insurance on super accounts that have been inactive for 16 months or more – you will need to let your fund know that you’d like to keep your life cover in place.
This change is effective from 1 July 2019 where an account is inactive if a contribution or rollover has not been received for 16 months.
Why the reform?
This initiative is designed to protect super savings and ensure that fund members don’t pay for life insurance they don’t need.
What you need to do
Legislation for the automatic cancellation of life insurance policies on inactive accounts has passed through both houses of parliament and is now law.
The problem here is that you could be at risk of losing valuable life insurance protection.
In some circumstances, it can make sense to hold onto life cover through super, even if you don’t actively contribute to the fund. This is particularly the case if you have a pre-existing medical condition or a high risk job, which can make it difficult to arrange life insurance cover elsewhere.
It’s worth stressing that this reform doesn’t just cover life insurance. It also applies to total and permanent disability (TPD) and income protection insurance.
An informed decision is critical
You may decide to continue paying the insurance premiums from your fund. Or alternatively, you may prefer to cancel your policy. What matters is that you make a decision based on what’s right for your needs – both today and tomorrow.
If you have a super fund to which you haven’t made contributions for some time, it’s important to speak with a FinChoice adviser to discuss the course of action that is right for you.