Many Australians have Income Protection (IP), or Salary Continuance. A great many will have a policy owned in superannuation. Few will understand the disadvantages of owning this important cover in superannuation.
- 1 tier vs 3 tier definitions – Super IP will have only one definition to assess your claim under. Non-super policies will offer three definitions – more chances of claim success.
- Indemnity vs Guaranteed – A super IP policy will require proof of income at the time of claim. Non-super policies can be ‘Guaranteed’ meaning no proof of income is required – more certainty you’ll receive the benefit you’ve paid for.
- Ease of claiming – To claim super IP, you must convince both the insurer and trustee of the superfund a benefit should be paid. Non-super IP – insurer’s definition only.
- Temporarily or permanently incapacitated –Super fund IP pays an income stream to a member who is temporarily incapacitated. This may cease if the insured is deemed to be permanently incapacitated & TPD claimed. You’ll need to check the terms & conditions with your super fund. Non-super IP pays an ongoing benefit for both temporary & permanent incapacity and you can claim TPD at the same time.
- Reduced benefit periods – Super IP may only pay a benefit to 2yrs reducing the benefit paid & leaving you without income in the long term – Non-super can pay to age 65 or 70.
- Restrictive policy conditions – Super IP will require you to use all your sick leave before a benefit can be paid – Non-super IP doesn’t have this restriction.
- Guaranteed Renewable – Super IP is often not guaranteed renewable, meaning the insurer can cancel the cover at any time. Non-super policies are guaranteed renewable.
- Taxation –The tax treatment of Super IP premiums & benefits may be less favourable than non-super policies.
- Reduction of retirement benefit – Paying premiums for super IP from your fund will reduce your retirement benefit.
- Unadvised – Without advice from a specialist Risk Adviser super IP may lead to inappropriate cover & poor outcomes.
Still wish to have your IP premiums paid from super, but want access to the superior terms, conditions, & ability to claim of a non-super owned policy? Super-linked Income Protection maybe a possible option to give you the best of both worlds. To properly understand the options and ensure you have the most appropriate cover – speak to a specialist Risk Adviser.
Director of MB Advice
If you wish to learn more or review your life insurances, contact Mark at MB Advice on 0478 171 656 or firstname.lastname@example.org.