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Stronger Super reforms risk increasing underinsurance gap
Both TAL and Maurice Blackburn lawyers have weighed in on the ongoing debate over superannuation account consolidation and the risk of losing valuable insurance policies.
Australians are regularly bombarded by advertising from financial services companies urging them to roll all their super into a single account, according to Maurice Blackburn associate Andrew Weinmann.
While this may be the best way to manage fees across several accounts, he cautioned people against dropping their insurance cover without first considering their needs, as well as the costs associated with cover outsider of superannuation.
Responding to Weinmann’s concerns, TAL managing director Jim Minto said he believed that auto-consolidation may have a major negative effect on underinsurance.
Minto said that while the latest statistics from Rice Warner found Australia’s life underinsurance problem to have lessened, the levels of life insurance are still only half of what they should be.
“If the number of superannuation accounts is automatically reduced in line with suggested new efficiency measures, there is a risk some people will lose a large part of their existing protection,” Minto said.
He added that care was needed to ensure good policy is developed to avoid adverse effects like the loss of much needed coverage.
“Life insurance has a core social purpose to provide people with dignity and choice in times of illness, injury or bereavement,” he said.
“Adequate life insurance means that the whole community may not have to carry the cost of looking after a family in such instances, and the family can maintain a reasonable lifestyle,” he added.
Weinmann added that consumers should always check the insurance within their super fund before consolidating accounts because it could make a huge difference both financially and emotionally.
AUTHOR
Ashleigh McIntyre
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