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Australian Super members hit hard by insurance premiums increase

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.

About Russell Cain

Russell Cain(Can be on found on Google +) is the CEO of xLife Pty Ltd, an award winning life insurance comparison service which incorporates the Life Insurance Direct and xLife brands. He has over 10 years experience in the accounting and finance industry as well as over 15 years experience in running small business. It was in 2005 when running one of these small businesses that xLife first materialised as Russell realised the importance of sound financial advice, high level of customer service and the important of openness and transparency with customers. In his spare time, Russell is an avid property investor and home renovator, enjoys cycling and playing squash and also participates in an entrepreneurial mentoring program where he currently helps mentor small business owners to help achieve their goals.