Many Australians have Income Protection (IP), or Salary Continuance. A great many will have a policy owned in superannuation. Few will understand the disadvantages of owning this important cover in superannuation.
- 1 tier vs 3 tier definitions – Super IP will have only one definition to assess your claim under. Non-super policies will offer three definitions – more chances of claim success.
- Indemnity vs Guaranteed – A super IP policy will require proof of income at the time of claim. Non-super policies can be ‘Guaranteed’ meaning no proof of income is required – more certainty you’ll receive the benefit you’ve paid for.
- Ease of claiming – To claim super IP, you must convince both the insurer and trustee of the superfund a benefit should be paid. Non-super IP – insurer’s definition only.
- Temporarily or permanently incapacitated –Super fund IP pays an income stream to a member who is temporarily incapacitated. This may cease if the insured is deemed to be permanently incapacitated & TPD claimed. You’ll need to check the terms & conditions with your super fund. Non-super IP pays an ongoing benefit for both temporary & permanent incapacity and you can claim TPD at the same time.
- Reduced benefit periods – Super IP may only pay a benefit to 2yrs reducing the benefit paid & leaving you without income in the long term – Non-super can pay to age 65 or 70.
- Restrictive policy conditions – Super IP will require you to use all your sick leave before a benefit can be paid – Non-super IP doesn’t have this restriction.
- Guaranteed Renewable – Super IP is often not guaranteed renewable, meaning the insurer can cancel the cover at any time. Non-super policies are guaranteed renewable.
- Taxation –The tax treatment of Super IP premiums & benefits may be less favourable than non-super policies.
- Reduction of retirement benefit – Paying premiums for super IP from your fund will reduce your retirement benefit.
- Unadvised – Without advice from a specialist Risk Adviser super IP may lead to inappropriate cover & poor outcomes.
Still wish to have your IP premiums paid from super, but want access to the superior terms, conditions, & ability to claim of a non-super owned policy? Super-linked Income Protection maybe a possible option to give you the best of both worlds. To properly understand the options and ensure you have the most appropriate cover – speak to a specialist Risk Adviser.
Mark Burgess
Director of MB Advice
If you wish to learn more or review your life insurances, contact Mark at MB Advice on 0478 171 656 or mark@mbadvice.com.au.
https://www.mbadvice.com.au/
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