Most Australian workers are automatically covered for a large lump sum if they pass away or have to cease work die to injury or illness.
Some super funds also provide income protection benefits. The benefit amounts depend on your super fund, job type and age.
This is an important safety net for millions of workers and their families who would otherwise have little or no insurance cover.
New reforms brought in at the end of 2021 introduced ‘super stapling’, designed to cut down on the number of superannuation funds employees collected over their careers and eliminate costly duplicate fees.
But these changes have raised concerns that employees may be paying into super insurance schemes - intended to cover death, total and permanent injury, and income protection - which no longer fit their needs.
Under the old rules, when a worker began a new job their employer would select a fund into which they would pay super contributions.
They meant workers could end up collecting multiple super funds throughout their career, resulting in duplicate fees.
The Australian Tax Office (ATO) estimates that there are approximately six million unintended multiple accounts in the super system charging $450 million in fees.
Over time, these unnecessary costs mounted up and seriously eroded savings, leaving people with far smaller final retirement pots.
In order to fix this, the government introduced ‘super stapling’ on November 1, 2021. This meant that the first super fund an employee signed up to would become their default fund and travel with them throughout their career – unless that employee opted to change.
So, when you start a new job, your employer is required to pay into your main superfund you have retained, unless you nominate another one.
These changes only apply to new employees who began work after November 1, 2020.
While this fixed one problem, it’s potentially caused another serious problem.
‘Super stapling’ could leave a generation of new employees underinsured.
The insurance provided by the superannuation fund you join in your first job, for example, is unlikely to be suitable as your career progresses and your personal circumstances change.
For example the insured benefit amount may be too low or the cover may have limitations or exclusions that make it inappropriate for you.
Regularly reviewing your super and insurance arrangements is one of those life admin tasks which often gets overlooked or forgotten about until you absolutely need it, by which time, it will be too late to update.
It’s important to check you have adequate cover. Check your benefit statement or ask your super fund about the default death, total and permanent disability (TPD), and income protection insurance arrangements.
You should do this regularly to consider whether your current arrangements provide adequate financial assistance to my family if I were to die, be unable to work due to injury or illness, or lose my job?
If the answer is ‘no’, then it is time to review your super and insurance arrangements. This is not a decision to be taken lightly and you may wish to get expert financial advice before making a switch.
You do not want to find out that the cover you’ve been paying into for years or decades isn’t enough at the very moment you need it most.
If you are having difficulty working or have ceased due to injury or illness, you can contact Maurice Blackburn to review your superannuation and insurance arrangements for free. Your condition does not have to be work related.
We can give you advice about your rights and help ensure you receive all of your insurance entitlements.
If you're unable to work due to illness or injury, you may be eligible to claim on your superannuation insurance. Your injury doesn't need to be work related. Our specialist superannuation lawyers are here to help.
Our Canberra office is now closed, but our team continues to serve ACT clients and are available for phone and video appointments. If you need legal advice, please call us on 1800 675 346.
We have lawyers who specialise in a range of legal claims who travel to Tasmania. If you need a lawyer in Hobart, Launceston or elsewhere in Tasmania, please call us on 1800 675 346.