Life Insurance policies through Super are subject to change and you can’t do much about it
As with all insurance products, the terms and conditions of a retail life insurance policy are defined in what is known as a Product Disclosure Statement (PDS)
A PDS is a document designed to be easily read and understood by a lay-person, explaining all the terms, inclusions and exclusions of the policies including things like how to contact the insurer and make a claim
When you sign a retail life insurance policy, as long as you pay your premiums, you and your insurer are bound by the PDS at the time that you signed for your life insurance policy. The terms, inclusions and exclusions cannot be changed: what is known as “guaranteed renewable”.
The terms, inclusions and exclusions of life insurance through Industry Superannuation are subject to change: they’re not "guaranteed renewable"
When it comes to life insurance through Industry Superannuation, the contract is between the Life Insurance provider and the Super Trustees: not between an individual and the Life Insurance provider.
Periodically, Superannuation funds will renegotiate the terms and conditions of the insurance contract they have with the life insurance provider
Periodically, Superannuation funds may change insurance providers entirely, again with new terms and conditions.
Unfortunately, these changes in terms, conditions and contracts do not always benefit members. And there is little that can be done by members.
As two examples, in the past few years, both Australian Super and MTAA Super have introduced small though critically important changes to the definition of the TPD coverage provided, making it more onerous for members to access TPD.
According to an article in the Sydney Morning Herald, one financial adviser described the issue of TPD and income protection in insurance in Super as “one very smelly dung heap” and to handle with caution: “wear gloves, a face mask and carry a long-handled shovel”
A reflection of not only the subtle changes that can occur to policies to make them less generous, though of the often difficulty members face accessing TPD and income insurances through their Super.
What can be done about it?
If ensuring that the terms, inclusions and exclusions under your life insurance policy cannot be changed, you need to enter into a direct policy with a life insurer: to ensure the terms of the policy are “guaranteed renewable”.
You can also pay for a direct life insurance through your Super.
There is also a chance you’ll pay less for your life insurance policy as well.
Conclusion
With default life insurance under Superannuation, the fineprint is subject to change and this could be life changing for some. By having a direct life insurance policy and keeping premius up-to-date, the fineprint cannot be changed and you will always know the terms, inclusions and exclusions of your policy.
