Seven myths about superannuation insurance

While you might have a basic understanding of superannuation – maybe that contributions go in from employers, and the fund will help finance your retirement - what’s often overlooked is that most Australians also have default insurance coverage linked to their super fund, offering protection for circumstances like disability and income protection.

Even when people know they have death and disability insurance in their super, they often don’t know what cover they hold, or how it all works. Our experienced team of superannuation and insurance lawyers work on these matters every day, and have helped thousands of Australians access their insurance entitlements. 

Here, they have answered some questions we hear most often from clients, to clear up common myths and misconceptions.

1. Myth: Claiming will take from the money saved for my retirement in my super fund

False: When you make a claim, it’s against an insurance policy, the same way you would claim for home and contents or car insurance.

The insurance payout is in addition to your super fund retirement savings. It is worth noting that any payouts you receive will usually go into your super fund, so there are important tax, Centrelink and other considerations for withdrawing that money.  

2. Myth: If you claim workers’ compensation, you can’t claim Total and Permanent Disability (TPD) insurance.

Usually false: Most of the time, TPD can be claimed alongside workers’ compensation or Income Protection insurance. However, these claims can impact one another so it’s important to get advice before making a claim to make sure you’re getting the most from your entitlements.

For example, in some states, workers who receive superannuation lump sums may not be entitled to weekly payments for a specified period of time or may have their weekly payment amount reduced (Source: WorkSafe). However, there are steps that can be taken to help preserve all entitlements so it’s important to get expert advice.

3. Myth: If my illness or injury is pre-existing, I cannot make a claim.

Not necessarily: You should still be fully covered, as long as you:

1. Previously worked without restrictions or limitations, and
2. Held insurance when your injury or illness caused you to stop working.

An experienced superannuation lawyer can help you understand what options are available to you.

4. Myth: My injury or illness isn’t related to work, so I can’t claim TPD

Not true: It doesn’t matter if you were injured or became ill at work, or elsewhere – what matters is if it means you’re unable to work because of the injury or illness. This also includes mental health conditions and degenerative diseases.

5. Myth: My account closed due to low balance or a roll over to a new fund, so I can’t claim TPD

Not necessarily: Whether you have a TPD claim depends on what cover you had at the time you stopped work, even if your super account is now closed or your insurance since lapsed. That’s why is important to get support when checking your eligibility to claim.

6. Myth: I stopped work many years ago so it’s too late to claim now

Usually false: Claims can often be lodged many years after you stopped work, as long as your injuries or illness are considered permanent.  It’s important to get expert advice if an super fund or insurer says you’re ineligible to make a claim, as they often get it wrong.

7.  Myth: I hadn’t yet consolidated my super, so I had multiple accounts and insurance policies when I stopped work, but I can only claim from one of them.

Not true: You can usually claim the lump sum disability insurance held with all super funds you were a member of when you stopped work.  However, depending on the policy fine print, it may be worth considering the timing, or order of claims, to maximise your entitlements. 

For income protection insurance policies, these are usually capped so you can’t receive more than 75% of your normal salary.

These are just a few of the misconceptions people have around super insurance, so if you’re in doubt about whether you have a claim, our expert super insurance team is here to help.