I recently switched my super contributions to Australian super from a retail fund but I haven't yet transferred my existing super balance over.
I have life, tpd & income protection insurance through the old fund. I started looking at insurance with Australian super and because I have a couple of health issues (nothing life threatening though), it looks like I will have problems getting coverage through them. I haven't yet hit submit on the application because I am worried they might decline it and if you have ever had insurance declined is something you are asked when you apply for insurance.
At this stage I am wondering whether to just stay with the retail fund as I have existing cover that they can't take off me.
I was switching funds to have lower fees mainly.
Has anyone been in this situation or have knowledge of this industry?
Switching Super Funds & Insurance
Comments
Fees are only part of what you should be reviewing. Performance of the fund should be priority
There's a couple of options:
Maintain both, keeping enough in the old to pay for the premiums. You have to be aware of the ongoing costs and the fact that that Super will essentially not be performing and just be a glorified insurance policy
Accept the loss and move to the new policy. This requires a look at your circumstances. Have they changed? Do you need the same level of cover? Going through a medical may still be worth it. Chances of outright rejection are low - it'll just have a higher premium and exclusions normally.
Take on a third party cover. Likely to cost substantially more. Will still require a medical and have exclusions.
You need to balance the likely costs and impacts of the insurance vs the performance of the fund. There's no point in having uber insurance (which you're paying for) and a rubbish fund.
If you die or suffer a TPD, your Super can be accessed anyway. In this instance, you will always want a higher performing fund and insurance as coverage for big ticket items such as mortgage.
Income protection is something most people actually go without and self manage through savings.
Income protection: depends entirely on your policy. Some corporate plans pay out to age 65, others for only 2 years. I was always a total non-believer but I'm now living on my partner's income protection. I know others in the same situation; who suggest income protection may be a better spend than private health cover.
Absolutely. The issue is (and I say this having a conversation with my old man just this past week on the same issue) is people get into a rut, never re-evaluate or become scared something will happen and so maintain a ridiculously high level of coverage that isn't inline with need.
As an example, my dad, retired but not 65, was paying income insurance for $1m coverage. Why! No mortgage, no kids (we're long gone out of the house), no substantial debts and a defined benefit pension. We canned it. Saved thousands a year.
Like everything, people need to set a calendar reminder and go over these things and update them. Wills and Super Beneficiary statements are another one.
my dad, retired but not 65, was paying income insurance for $1m coverage
Income insurance of $1m at almost retirement age? And the premium was only "thousands"?
Australian Super is not the lowest fees, but does have good performance which is what you should be looking at. Long term, how does the performance of your retail fund compare to AS? If Aus Super is significantly better, apply for insurance with them, and in the (unlikely) event they reject you, you could either continue with two funds, or switch everything back to the retail fund. Note, I’m long-term with AS, it’s been very good for me.
You'll need to know exactly what insurance you'll have in your old fund. Is it one of those auto acceptance policies or a fully underwritten one. The get financial advice on whether you should keep the old one or change. Big decision which could nip you later on if unfortunate.
And be clear on why you are moving super funds too.
Retail funds have reduced their fees since the Royal Commission so on one hand you should be wary of high fees limiting your growth but then as long as you monitor and compare fund performance you may be OK. I'd recommend Australian Super's fee-free simple advice. If you need to dive deeper you can get a quote for comprehensive advice.