Insurance inside Super – BEWARE!
If you have insurance inside Super you need to be aware of the following 3 things.
The first thing that you need to be aware of is that your premiums will eat into your account balance, yes, I know it is obvious but trust me, a lot of people forget that. Especially if they have reduced their working hours, if they have stopped working or if they have changed jobs and their income is less than what they were making before.
Insurance premiums inside Super are eating into your account balance and that will affect your retirement balance down the track because your premiums can be worth thousands and thousands of dollars. So, what I suggest is contributing more into Super to cover the premium amount because then at least you know that your employer contributions will help your account balance to grow.
The second thing that you need to be aware of is the insurance benefit amount that you have inside Super may be insufficient to meet your financial needs. You see, a lot of the times when I sit with clients, they have a default insurance cover. What that means is that they have opened up an account with their Superfund, they have automatically been given some insurance cover. 99.99% of the time, it does not meet my client’s needs. The reason is that they have a mortgage, they have major debts, they have kids that are financially dependent on them.
When you add up all these debts the amount that they need to continue with their lifestyle is going to be greater than the default insurance amount that they have in place. I strongly suggest you sit with someone and review that, especially if you have major debts.
The third thing that you need to be aware of is the tax implications if it’s paid to a non-financial dependent. For example, if your beneficiary is an adult child and you are relying on the insurance to be paid to them, the amount that you think that they will receive may not be the amount that they actually receive. There are tax implications that you need to be aware of. Again strongly recommend you speak to a financial adviser to discuss this.
The three things that I would like you to remember when it comes to insurance inside Super. The first thing is it eats into your account balance. The second thing is that the amount may be insufficient to meet your financial needs. Thirdly, consider the tax implications, especially if it’s paid to a non-financial dependent.
If you would like more information, or if you would like me to sit down with you and go through your insurances please contact Better Financial Tomorrow, St Marys on (02) 9623 4351 or email email@example.com