Rod Myer writes at The New Daily –
Insurance cover in superannuation could be redesigned to closer meet the financial needs of members, research house Rice Warner believes.
Because insurance in super needs depend on age and family situation, insurance products could be designed around such variables as age and family type.
Currently insurance is pretty much a ‘one size fits all’ arrangement with everyone paying the same premium in the same category getting the same level of cover. Even those that choose to pay more get the same upgraded cover as others in their category.
However as the following table from Rice Warner shows, people’s insurance needs vary dramatically with their life circumstances.
Chant West says all this could change with smart design.
“Using the above statistics, we could shift the default sum insured to one based on needs – all without changing the premium or getting any additional information from members” the research says.
“We would simply assess the amount of the claim based on the dependants at the time of death.”
The super industry has begun to move on the discrepancies within super that see younger people erode their accounts by paying for insurance they don’t need.
Recently Cbus and AustralianSuper have announced moves that will reduce the cost of super for young members by reducing or eliminating coverage of various types of insurance for those under 20. Other industry funds such as HOSTPLUS and First Super have been working to reduce the cost of insurance without compromising cover.
And, according to another researcher, Rainmaker, an average 20-year-old now would receive around $175,000 in default death cover, down from from a high of $210,000 in 2014, Fairfax Media reported.
But the average level of cover offered to younger fund members has dropped by 20 per cent over the past two years.
Our comment – It all makes good sense for commercial super – but how long will change take?
Another possible solution is an SMSF (seek advice for suitability, or ask us to refer a helpful advisor for you) where you can select the insurance to suit your needs, sometimes at competitive prices – this is the flexibility and comfort an SMSF may provide you.
Interested to know what Self-Managed Super (SMSF) is all about, and if it is for you?
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