Changes are about to happen to many fund members whose cost benefits have been overlooked by SMSFs.
Over 20,000 clients under the self-managed superannuation fund (SMSF) who have been under-insured will be offered automatic life coverage of up to $750,000.
According to AIA Australia, this is the aim of insurance groups and financial advisers to uplift the coverage of the under-insured sector whose size, according to the different surveys, vary.
Grant Abbot, principal of SMSF Strategies said that about 68% of Australian SMSF Members Association (ASMA) is without insurance while some have life insurance under SMSF, individually or together.
The survey revealed that only 6% would take on insurance under SMSF while 40% of the members did not want coverage through SMSF. Twenty-two percent of the respondents already had their own life insurance.
In the November 2010 survey conducted by RiceWarner, only 13% showed to have coverage under SMSF. It indicates that the sector is “forgotten” said director Richard Weatherhead. He added that this sector was identified by insurers as growth opportunity but significant inroads being made into the SMSF risk insurance market is yet to be seen.
In his review of Austalia’s superannuation system, Jeremy Cooper’s survey result of 12.7% was slightly lower than that of RiceWarner.
Financial advisers seemed “focus on the investment asset for a client and fail to consider what else the client is potentially exposed to as a result of their asset allocation advice or client purchase decision-making”, said John Nantes, WHK’s financial services head.
Nantes quipped that “property within SMSFs remains an asset favoured by many trustees and investment properties required landlord insurance and general insurance”. He said an adviser often puts little effort to help clients fulfill these requirements.
The SMSF Master Insurance Plan has allowed “online access to insurance at competitive wholesale rates, said AIA general manager for life insurance, Damien Mu. It will help SMSF members save 25% or more on standard death, total permanent disability (TPD) and income protection (IP) cover, added Mu.