New 'Protecting Your Super' laws will come into effect from 1 July 2019

Amendments to superannuation laws include forcing all super funds to cancel any life insurance for members who have not made contributions into their account for 16 months.

If you do not want your insurance cancelled, you will need to either make a contribution or make a specific declaration to the fund to continue your insurance.

The intent of the legislation is to protect superannuation balances from forgotten insurance premiums eating away retirement savings. However there are many people who hold their insurance cover in superannuation because they cannot afford to pay for it from their own cash flow or because they are unable to obtain cover elsewhere because of pre-existing medical conditions. The legislation makes no allowances for this and cover will be cancelled regardless.

In the event your existing cover is cancelled, you may not be able to get new cover on the same terms. You may need to disclose medical conditions that have arisen since you originally applied, and have higher premiums or exclusions as a result, or you may no longer be eligible for cover at all through that fund. In many circumstances, particularly if you are older, or have poor health or a high-risk occupation, your existing policy may be the only insurance policy you hold. It may also be the only affordable insurance you are able to get.

Insurance is critical if you have debt, dependents or rely on your income for your financial security. If that insurance is held in a super fund you're not contributing to, you will need to consider whether to make the fund active, or at least ensure that the trustee of the fund knows you want it by opting in.

The legislation makes no provision to protect you from any of these unforeseen consequences. If you're not sure what you have, this could also present a great opportunity to review your insurance and ensure you have the best cover you can afford.



About the Author - Tony Bedworth

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