Key industry stakeholders have warned clients with life insurance cover inside their superannuation that they may end up without that cover from 1 July unless they elect to retain the insurance.
A super fund member’s life insurance will be cancelled if their account is inactive for 16 months or more as part of the government’s Protecting Your Superannuation Package reforms.
Super funds had until 1 April to identify members who have been continuously inactive for 16 months or more and by 1 May had to inform them that they will lose their life insurance cover unless they choose to opt in.
Integrity Life general manager of distribution Suzie Brown said there are Australians who may not be aware of how the upcoming changes to life insurance within super will affect them and their ability to financially protect themselves or their loved ones when they need it most.
Further, she said the Australian Taxation Office will have the power to consolidate inactive super accounts with a balance below $6,000.
“Despite the fact that super funds have communicated with people about the changes, the tight time frame means that there isn’t much time for people to opt-in to insurance. That is, to let their fund know that they want to keep their life insurance cover,” Ms Brown said.
The SMSF Association noted concerns that some SMSF members deliberately have an APRA-regulated fund to get life insurance and will lose that life insurance because they have not checked correspondence from their APRA fund or contributed to it.
“This could have a devastating impact on policy holders or their beneficiaries if their insurance cover is unknowingly terminated. Furthermore, it may be extremely difficult and costly to try and access insurance at a later stage,” said SMSF Association chief executive John Maroney.
“It is therefore imperative that SMSF members wishing to maintain their life insurance cover do so now by giving direction to their APRA-regulated fund that they wish to opt in.
“The other option is to make a contribution or a rollover into the ‘inactive’ APRA-regulated fund so that the period when a fund starts to be inactive is reset. But even if this approach is adopted, we recommend that SMSF members opt in.”
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