The retirement savings of millions of Australians will take a hit after Australian Super increased their insurance premiums by up to 75%.
This is the second premium increase for the fund, which is one of Australia’s largest with over 2 million members, in 9 months after they increased their premiums by up to 40% in June 2013.
Prior to the latest increase, a 40 year old labourer or blue collar worker would have expected to pay around $852.80 per year for $1 million of life insurance, compared to now paying $1154.40 per year – an increase of 35%.
The same worker would also expect to see a 75% increase in income protection premiums, paying $439.40 per year, compared to $250.64 per year before the increase, for a maximum monthly benefit of $4,500.
Russell Cain, CEO of insurance comparison website xLife.com.au said it was important consumers were aware of the price rise and what they were paying for insurance.
“Life insurance and income protection premiums have continued to rise with Australian Super and those who have insurance through them – either automatically with default cover or by their own choice – need to be aware of what they are paying for,” Mr Cain said.
“Members of the fund need to actively review their personal risk insurance to make sure they are getting value for money, and to know what their policy covers them for as their may be some limitations.”
Some of the limitations of insurance through your industry super fund include:
- Limited premium options – some funds may only offer stepped premium options
- Lower expiry ages – generally 70 for life insurance
- Lower maximum entry age – generally 70 for life insurance
- Limited waiting and benefit period options for income protection
- Limited policy options available, if any
While acknowledging the limitations of insurance through industry super funds, Mr Cain did say it still had its part to play.
“Under insurance is still a challenge in Australia with many people either not having enough cover or having no cover at all. While default cover in super
may not be enough to meet a person’s circumstances compared to a customised policy, it is better than having no cover at all”.
Mr Cain said anyone looking to take out cover – whether it is inside super or not – should compare life insurance policies to make sure they are getting value for money and that the cover is suitable for their circumstances.
“Not many people are aware that retail life insurance policies can be funded by their super fund – industry or otherwise – and they also offer tremendous value for customers – both in their premium options, what they cover and their flexibility,” Mr Cain said.
“The most competitive policy we found for a 40 year old male for $1 million life insurance was $624.49 per year with stepped premiums – an annual saving of $228.31 when compared to Australian Super.”
For those who insist on taking out cover through their industry fund, Mr Cain offered these suggestions:
“Don’t take default cover as being sufficient, consider adjusting your cover so it meets your circumstances and don’t just accept the price rises – shop around, their may be a better deal out their for you.”
The latest price rises for Aussie Super came into affect on the 28th of March 2014.