Forms of super insurance

There are three types of insurance you can hold inside super: life, total and permanent disability (TPD) and income protection insurance. Many super funds automatically insure their members and will provide a (relatively small) payout if, for example, they die or suffer a debilitating accident. But the level of default cover is likely to fall short of your needs. 

Canstar found that while young families typically need around $680,000 of life cover, the average default life policy is only $200,000. 

Nevertheless, you can pay a little extra to top up your insurance through your super fund if you want more cover. There are three big advantages to doing this:

• These policies are relatively inexpensive because super funds can buy in bulk and pass on the discount they receive to members; 
  
  
• These policies are easily accessed. You’ll typically have your application for insurance approved without having to be examined by a doctor or provide detailed medical information; 
  
  
• You pay for cover from your pre-tax income because the cost of premiums is taken out of the super contribution your employer deposits in your fund.

What’s the catch?

Some life insurance is better than none, but there are downsides of a one-size-fits-all solution. Super funds get bulk-buying discounts on the basis that they purchase standardised ‘off the shelf’ policies. Such a policy may or may not be suited to your individual needs. 

Automatic default cover also means younger, healthy members are subsidising older and less healthy members. And while paying for insurance out of your super contributions can help your cash flow, it’s money that’s being diverted from your retirement nest egg. 

You also need to keep in mind that insurance taken out through your super isn’t portable; if you switch to another super fund that insurance will cease. Payouts can take a while because the insurer pays the super fund, which then pays the claimant. 

If you fail to make a binding beneficiary nomination, or your super fund doesn’t offer binding nominations, the super trustee will decide who gets your benefits if you die. That beneficiary may be taxed more heavily than would be the case with a retail policy. And finally, the insurance ends when you retire. 

Going outside

Getting insurance outside of super can be a little more expensive and time-consuming but it’s worth considering for a number of reasons.

• You’ll have access to a wider range of policies. That means you can find one that’s more tailored to your individual needs. 
  
  
• You can’t get trauma insurance through super, but you can in a retail policy. 
  
  
• Payouts tend to be faster and you’ll have more capacity to ensure a death benefit goes to the beneficiary you want it to. 
  
  
• If you’re in good shape, your premiums will reflect this. 
  
  
• While you’ll be using your after-tax income to pay for it, income-protection insurance is tax deductible.

Another issue with income-protection policies through super is that they are linked to your current income. This may be unusually low when you make a claim due to, for example, having gone part-time to look after children. In contrast, retail income protection policies can offer a guaranteed benefit. 

SMSFs and insurance

It’s not just big public super funds that can provide insurance cover. If you have your own self-managed super fund (SMSF) you’re legally obliged to consider the insurance needs of members when drafting your fund’s investment strategy. Life, TPD and income protection insurance can all be purchased through an SMSF but it won’t have access to the discounts large funds enjoy. Plus, you generally need to undergo a medical examination before receiving cover, so there are few advantages of holding insurance inside your SMSF. 

If you would like to discuss the best insurance solution for your family’s needs, please give us a call.

 

The lost art of conversation

When was the last time you had a lengthy chat to a friend over the phone or, rarer still, a decent face-to-face catch up? Remember spending time with a loved one making the most of precious hours having saved up every story, anecdote and interesting conversation starter up your sleeve? Nowadays the bulk of our relationships seem to be conducted via text. 

It’s not just SMS. We now have so many different ways to communicate 24/7, if you also include email, social media and video as well as phone calls. We are adapting the way we communicate to suit these means. Communication now tends to happen in brief, rapid-fire snatches and it can feel like conversation is becoming a lost art. 

Is technology really making it easier?

It’s certainly not all bad. Much is made of the way that social media makes it easier to connect with friends and family you don’t see often. There’s a reason that Facebook’s tagline is somewhat emotive: ‘...helps you connect and share with the people in your life’. 

Proponents of digital communications platforms say that accessibility and human-centred design means that social platforms aren’t just fads, they’re representative of a real change in the way humans communicate. And they point to certain stats, like older Aussies being the fastest growing demographic of social media users, to prove their point.i 

On the flip side, proud Luddites say that communicating might be easier than ever, but it’s a lot less meaningful. Sometimes it seems like they’ve got a point. There’s a big difference between sitting down for a cuppa and a chat with a friend and getting a text that’s basically four words, perhaps with a few nonsense vegetable emojis thrown in for good measure. 

It’s so easy to misconstrue the tone of a text, it can be hard to tell if someone is serious or pulling your leg. Think of how much is conveyed with a smile, a grimace, an eye roll or an arched eyebrow. That’s why emojis were invented, to help us to more easily navigate the complexities of not being able to see the expression on someone’s face or hear the inflection in their voice. 

We are also becoming more glued to our devices to the detriment of real life connections. It’s not hard to miss, say, the pair of high schools girls walking side by side texting furiously, the table of friends ignoring their lattes in favour of their screens or the couple checking out their socials instead of each other. 

Of course, there are exceptions to every rule in this debate. For every person who feels like they’ve missed out on connecting face to face, there’s a person in dire straits who’s been able to reach out to strangers – think things like medical crowdfunding.iiAnd that’s without even touching on the millions of conversations that happen every day on dating sites. 

Balancing convenience and ‘real’ conversation

While we are certainly not advocating forgoing the convenience of technology, being able to initiate and maintain a conversation is an important skill. Conversations are good for the soul, and the river of words that flows and pauses and goes off on tangents helps you to develop and express your ideas. 

If you’re interested in reclaiming the lost art of conversation, there are some simple steps you can take to have a more meaningful connection with those you care about.

• Limit your use of technology at the dinner table and be 'present' with your loved ones. 
  
  
• Conversations are about listening as much as speaking, ask questions and try not to interrupt the speaker. 
  
  
• Look into the speaker’s eyes as you talk and take notice of their body language and facial expressions.

Happy chatting! 

i https://www2.deloitte.com/au/en/pages/technology-media-and-telecommunications/articles/media-consumer-survey-2017.html 
ii http://www.sbs.com.au/news/article/2015/09/18/why-are-so-many-australians-forced-crowdfund-medical-costs

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Please note this information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a financial advisor, whether the information is appropriate in light of your particular needs and circumstances.

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