The COVID-19 pandemic has had a profound impact on the Australian economy. Different states have different levels of restrictions and numbers of COVID-19 cases, meaning businesses will be operating at varying levels and under varying pressures
The impact on workers has been just as big, with many being let go, or stood down indefinitely. Women, young workers and those in casual or contract roles have been the worst impacted. The unemployment rate continues to rise, and is expected to climb even further over the coming months.
Part of the government’s response has been to adjust superannuation early access laws. The new laws allowed workers and sole traders who have been impacted by COVID-19 to withdraw $10,000 last financial year, and a further $10,000 from 1 July 2020. Strict criteria apply and further details about the scheme and what to consider before withdrawing super money can be found here.
This policy, combined with changes to the way insurance is provided to fund members via their account which came into force in 2019 puts many Australians at risk of losing valuable life and disability insurance at a time when they can least afford to lose it.
Why is losing insurance through super so bad?
Your superannuation is not just retirement savings. The insurance attached your superannuation, such as income protection or total and permanent disablement (TPD) cover, is critical safety net if you become ill or injured and cannot work.
There are two main negative outcomes if you've lost your job:
- Withdrawing all your money from your superannuation account. If you withdraw all the money from your account there will be no funds available to pay insurance premiums and cover will cease.
- No contributions made to your super account for 16 months. If you are facing longer term unemployment and no contributions are made to your super fund for 16 months, your insurance will be cancelled.
Why should I care?
Insurance through super is often the only cover many workers have for death and disability. Because it is provided as a ‘Group’ policy, it is affordable and can often cover pre-existing conditions that personal insurance wont.
As it is provided to members automatically, many people don't even realise that they have cover through the super fund, and don’t think to check when the worst happens and they can no longer work because of an accident or are diagnosed with an illness.
It’s at this time that people no longer have an income but need to access funds for rehabilitation, treatment or everyday living expenses which makes automatic insurance so important.
If you lose automatic insurance that you already have, there is a risk you may not get it back, or if you do it might not be offered on the same terms. This means there could be more fine print, exclusions and maybe higher premiums.
What can I do?
If you do need to access your account balance early due to COVID-19, make sure you first speak to your super fund and find out how much money you should leave in your super account to maintain your insurance cover. More information on this can be found here.
If you are concerned that no contributions are likely to be made to your super account for 16 months or more you can contact your fund and find out how to ‘opt-in’ to continue your insurance cover.
Choosing to continue your insurance is a decision for you, and you should be aware that if you are unemployed for an extended period of time, it may impact how and what you can claim through your insurance policy. It’s important to seek advice.
Importantly, if you have stopped work, or are not able to return to work due to illness or injury you may be able to claim on insurance through your super now. Maurice Blackburn provide a free super check and can advise if we think you have a claim.
It cost you nothing to know where you stand.