16 Jul Increase of Life Insurance Fees
Notifications of higher premiums of as much as 50% for cover through superannuation are being sent to members. From June 29, about 2 million AustralianSuper members will have to endure 40% higher death and total disability premiums and 25% increase on income protection cover.
TAL Australia’s Jim Minto said the increase is a result of more claims filed by fund members who struggle in a weak economy and higher unemployment rate. He added though that prices are expected to dip as the economy improves and claims decrease towards the end of the global financial crisis.
Insurers and super funds are in a contract that is good for 3 years and most are up for renewal, simultaneously. In the renegotiations, most funds are likely to announce the expected price increases.
Facts that members need to know:
- Insurance is a default option but members may choose to actively opt out.
- Money is automatically deducted by the fund from the member’s account balance and is based on member’s age.
- Although noted in members’ statements, most are unaware that they are covered. Those who are aware have the option to increase or decrease their cover.
- Insurance within super is more affordable compared to getting the same cover outside of it.
The increase in insurance premiums will apply on all super funds types excluding non-profit retail funds under banks or corporate funds. But despite the increase, better coverage will be provided. Warren Chant of Chant West said that despite the prices of insurance, it still provides good value.
For a 40-year old member of AustralianSuper, his death and disability cover for $150,000 would go up from $2 a week to $2.80 after the 40% increase.