I’ve recently had reason to examine at close hand, the value of Income Protection, labelled Total and Temporary Protection within a workplace superannuation product.
I have a new client, who has recently suffered a series of strokes that will leave the client, most likely unable to return to work, especially to the high pressure role previously held. All sick leave and other entitlements have been exhausted and approval for an income payment has been obtained, paid via the insurance held within the workplace superannuation account.
The insurance is labelled Total and Temporary Income benefit but it has a payment period specified and most members would assume they would be paid for the term shown on their statements.
In the case of the person we are working with, there is some doubt, although not yet confirmed, that our client will now not be able to return to work. In this case the client has been advised by letter, that the client’s income benefits will cease in December, after less than 6 months of benefit’s being paid.
On advice, our client has other insurance benefits, but not income protection. The level of insurance for Life and Total and Permanent Disablement within the workplace superannuation account is low because of the age of the client and the investment balance is not great because of the years of service.
I often get told by public servants in particular, that my insurance is covered in my super. Over the years we have seen a number of cases similar to this recent case, where members of a workplace superannuation fund expect that their income protection benefits will be paid for the term specified on their statements, only to find out once on claim, that they may not have the security they initially thought they had.
Our new client, if the medical diagnosis is confirmed, may not be able to work at all again. The plan was to work for another 5 years, and at that point retirement would have been secure. Forced retirement, 5 years early and without the security of the income protection insurance thought to be held, will mean a significantly different retirement.
What does this mean, and what can you do to ensure your financial future is secure? Get advice. Make sure your insurance definitions are confirmed and that your cover is what you think it is. But put simply, insurance through superannuation is not what it used to be. Be aware that a good income protection insurance plan is about providing the right amount of funds when they are needed, to the person who needs them. In the case of my new client, this will not happen.
All insurance and superannuation plans should be reviewed by advisers not associated with the product provider.
Peter Jordan is a Sub Authorised Representative 244948 of Joredg Pty Ltd as trustee for the Jordan Hybrid Fixed Trust, Corporate Authorised Representative 473095 of Keystone Partnership Pty Ltd AFSL No 466137