Putting Members’ Interests First: insurance reforms
WHAT ARE THE CHANGES?
When you joined First Super, you automatically received a ‘default’ level of insurance cover for Death and Total and Permanent Disablement (TPD) on an “opt-out” basis.
Since 1 October 2012, everyone with a MySuper account has been automatically opted into Death and Total and Permanent Disability Insurance as part of the Federal Government’s Stronger Super reforms. This was introduced to tackle the problem of many Australians not having suitable cover in the case of injury, serious illness or death. Insurance inside super gives people like yourself peace of mind knowing that if the worst were to happen you have some protection in place
In September 2019, the Federal Government passed legislation to support its Putting Members’ Interests First (PMIF) reforms. These changes follow the Protecting Your Super Package (PYS) reforms which came into effect on 1 July 2019.
The new PMIF reforms require super funds to only provide insurance on an “opt-in” basis from 1 April 2020 to:
- members whose superannuation account balance has not been $6,000 or more on or after 1 November 2019; and
- members who are under 25 and begin to hold a new superannuation account from 1 April 2020.
This means if your First Super account balance has not been $6,000 or more on or after 1 November 2019, we will have to cancel your insurance cover on 1 April 2020 unless you tell us before that date that you want to keep it.
In addition, new members joining a super fund from 1 April whose account balances are below $6,000, or are under age 25, will have to opt in to get insurance – they won’t get it as a default benefit, as was previously the case.
WHy is this happening?
The PMIF reforms aim to ensure members’ superannuation balances are not unnecessarily eroded by insurance premiums.
They follow changes made for the same reasons under the PYS reforms, where affected members whose super account balances had been inactive for 16 months or more had their insurance cancelled if they didn’t make a contribution to their account or opt in to keep their cover.
WHO IS AFFECTED BY THE PMIF REFORMS?
You are affected by these changes if your super account balance is less than $6,000 and has never been above this amount on or after 1 November 2019.
Your insurance will not be cancelled if you have undertaken any action with your insurance before 1 November that acts as an election (e.g. applying for voluntary or underwritten insurance cover, opting in under PYS).
Super funds will be unable to continue to provide life insurance to affected members after 1 April 2020 unless:
- they formally tell us that they want to keep the cover; OR
- their account balance is greater or equal to $6,000 at any time between 1 November 2019 and 1 April 2020.
This means that if your First Super balance is under $6,000, you must complete an election (a formal opt-in) to keep your insurance inside super to reach us no later than Monday 31 March 2020.
If you are an affected member and we don’t hear from you, we will be required to cancel your First Super insurance cover by law on 1 April 2020.
ARE THERE ANY EXCEPTIONS?
Under the PMIF reforms, super funds can continue to provide insurance on an “opt-out” basis where a member is employed in a dangerous occupation. This is known as the “dangerous occupation exemption”.
This exemption will come into effect only if the First Super Trustee decides to apply it. If you are affected by this, we will be in touch again before the 1 April 2020 deadline.
Any dangerous occupations exemptions will be published on this web page in due course.
HOW IS FIRST SUPER RESPONDING?
First Super is working on a number of communications for affected members that include:
- information on how the reforms affect them;
- their current level of cover and the cost;
- factors to consider when making a decision about whether or not to keep insurance inside super; and
- details on how to opt in to keep your insurance cover.
Members will receive a letter and other communications from us in the coming weeks if:
- their First Super account balance is currently less than $6,000;
- their account balance has never been above $6,000; and
- they have not taken any action with their insurance before 1 November that acts as an election (e.g. applying for voluntary or underwritten insurance cover, opting in under PYS).
WANT HELP TO MAKE A DECISION?
If you are unsure about whether or not you should be taking any action, we encourage you to seek advice.
If you would like to discuss whether insurance in super is right for your circumstances and whether you have enough protection, you can speak to a First Super Financial Planner. Intrafund advice is available at no additional cost to First Super members.
Contact our Member Services Team on 1300 360 988 or email@example.com to request a callback.
HOW DO I ELECT TO KEEP MY INSURANCE IN SUPER?
If you want to stay protected and keep your insurance with First Super, you need to let us know. The good news is that you’re in control. You can elect to stop your insurance from being cancelled – but you must take action by 31 March 2020 to prevent it from being turned off.
To keep your insurance cover with your First Super account, you can either:
- Sign and date the form enclosed with your letter. Then return it in the postage paid envelope to reach us by 31 March 2020. Or you can scan the form and email it to firstname.lastname@example.org.
- Opt in using our online form accessible by clicking the button below.
We will write to you to confirm that we have received your election and that your insurance cover will be maintained.
What cover do First Super members have?
When you joined First Super, you automatically received a ‘default’ level of cover for Death and Total and Permanent Disablement (TPD). The level of default cover you receive depends on your age and employment type. Full details can be found in our Insurance booklet.
If you are not sure what insurance you have or how much cover you have, it’s detailed on your Annual Member Statement. Alternatively, you can check by calling our Member Services Team on 1300 360 988 or logging into your firstonline account.
Here’s a breakdown of the protection most members have through their First Super account:
- 4 units of Total and Permanent Disablement cover
This type of insurance pays you a lump sum if you become seriously disabled and are unlikely to ever work again. It can be used for your ongoing bills (such as mortgages and living expenses) and for your medical expenses.
- 4 units of Death cover
This type of insurance is for the benefit of your family or any dependants who will receive it when you die. It can be used for your debts, paying towards your funeral, or to help your family pay the bills that keep coming in.
Members aged 34 and under have $200,000 of cover. This amount reduces from age 35 onwards each year down to $5,400 at ages 65 to 69. You can find full details of the default value of 4 units of cover, and how First Super’s insurance cover works in our ‘Insurance’ booklet.
More details on First Super’s insurance inside super products are available in the Insurance Options section of our website.
What insurance cover does First Super provide?
At First Super, we offer three types of insurance cover.
- Death cover provides a lump sum payment in the event of your death, or on diagnosis of a terminal illness. It can be used for your debts, your funeral, or to help your family pay the bills that keep coming in.
- TPD cover provides a lump sum payment if you become totally and permanently disabled. It can be used for your ongoing bills (such as mortgages and living expenses) and for your medical expenses.
- Income Protection cover is optional and provides you with an ongoing payment if you can’t work for a long period because you are sick or injured. You can receive up to 85% of your income while you’re off work (depending on your level of cover); this is made up of 75% income replacement and 10% superannuation contribution. This way, you don’t have to think about the bills. You can concentrate on recovering.
What are the advantages of having insurance inside super?
- You’re protected.
Rest easy knowing that you’re protected in case of serious illness, injury or death.
- There are no out-of-pocket costs
Insurance paid for through your super account means you don’t feel the pain of paying for it each month. The fees are automatically taken from your super payments.
- It’s cheaper
Our bargaining power enables us to negotiate competitive fees for our members – which means you’re paying less for your level of cover than if you were to buy insurance yourself outside of super. What’s more, as we are a profit-to-member super fund, you only pay for what it costs to provide the insurance cover.
Is it worth me keeping my insurance cover?
Since 1 October 2012, as part of the Federal Government’s Stronger Super reforms, everyone with a MySuper account was automatically opted into Death and Total and Permanent Disability (TPD) insurance. This was introduced by the Government to tackle the problem of many Australians not having suitable cover in the case of injury, serious illness or death.
What would you do if something unexpected happened?
Factors you may wish to consider when deciding whether to keep your insurance in super are:
- Do you need to pay your mortgage or any other debts such as child care, education and living expenses?
- Do you have a partner or dependents who rely on your income? In the unfortunate event of your death, would your dependants be financially affected?
- How would bills, loans and living expenses be paid if you were no longer here to provide for your family, or suffered an injury that meant you couldn’t work anymore?
What do I do if I don’t want to keep my insurance cover?
If you don’t want to keep your First Super insurance cover, you don’t need to do anything. Your cover will automatically stop on 1 April 2020 if we don’t hear from you.
You can also cancel your cover at any time by contacting our Member Services Team on 1300 360 988 or email@example.com.
What happens to my insurance until it is cancelled?
Your Death and TPD insurance cover continues until it is switched off.
Your rights to be covered by insurance remain unaffected until the end of the period for which premiums have been charged. Please refer to page 4 of our Insurance booklet – available from firstsuper.com.au/pds – for more details of when Death and TPD insurance cover ends with First Super.
How much cover do I need?
This is a personal question and is best answered by an expert financial adviser. Generally speaking, you want enough to pay off any debts, cover ongoing medical costs and living expenses you and your family.
If you would like to discuss whether insurance in super is right for your circumstances and whether you have enough protection, you can speak to a First Super Financial Planner.
Intra-fund advice is available at no additional cost to First Super members. If this advice becomes more complex, there may be additional costs paid for on a fee-for-service basis.
Contact our Member Services Team on 1300 360 988 or firstname.lastname@example.org to request a callback.
How does my insurance differ to WorkCover?
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WorkCover is automatically provided to all employees in Australia, but there are some clear ways that it falls short of peoples’ needs should something happen:
- WorkCover does not protect against injuries sustained outside of work – life and TPD insurance cover you for unfortunate circumstances, no matter how or where they occurred.
- The laws that govern worker’s compensation differ from state to state in Australia. So, you may be eligible for medical benefits, disability cover, as well as loss of income in a particular state, but may be able to claim only medical expenses in another – life and TPD insurance have clear definitions that hold up wherever you are.
There’s no cover for expenses unrelated to the injury: If you do sustain an injury that is eligible for WorkCover, then you stand to get only those expenses which are related to the injury – with life and TPD insurance, you know the set amount which you’re entitled to claim.