13
November
2018

Should the I accept the group insurance on offer?

Group Insurance Offer

One of the changes in the May Budget that received very little attention was that, for those under 25, guaranteed acceptance group insurance for employee super funds became opt-in. The current situation is that, everyone receiving group cover are automatically opted-in and those who are not interested have to actively opt-out.

My initial thought was that this was a good thing; most young people probably don’t need insurance. This is only partially true in itself but, after chatting with colleagues, this change might have some long-term negative consequences.

Firstly, no one is going to think about opting-in when they join a new employer super fund; it is unlikely they will make an active choice.  As it currently stands, people aren’t actively choosing to take insurance, and virtually everyone is being passively insured.  This is exactly why the change is being made. Initially, I thought this was a positive change as we won’t have people paying for insurance they don’t need. However, we have a massive underinsurance problem in Australia; this automatic opting-in of group insurance somewhat alleviates this issue.

The area I didn’t consider was the Total and Permanent Disability (TPD) aspect of group insurance. Arguably, young people, who have the highest rate of accidents, are probably one of the higher risk categories for becoming permanently disabled. A simple car accident can financially ruin not only the individual but their family.  At least having insurance cover would provide some relief.

Furthermore, young people grow up. When the time comes that they have financial commitments and dependants and require life insurance, they are not able to simply opt-in to their existing group insurance.  They will be required to apply for cover on an individual basis.  In general, this is not a bad thing, unless they don’t qualify for insurance as they are unable to be underwritten.

When applying as an individual, your medical history, claims history and work history is all considered before you are accepted for cover. A lot of people who perhaps need insurance cover the most won’t be able to be insured.

My wife is a classic example of how the automatic opt-in insurance can be helpful down the track. My wife has eye issues and would most certainly have eye exclusions on her TPD and income protection insurance. When she was younger she was automatically opted-in to 2 insurance policies that, at the time, she wouldn’t have thought she needed.  Now, we retain the policies (along with the associated superannuation) in addition to her current employer super and insurance. We need this insurance and this is the only way we could be covered. Under the new Legislation, my wife would never have opted-in, therefore we’d be greatly exposed now.

My new opinion is to encourage the young people you know to opt-in to the group insurance associated with their super when they start working.  Far better to have insurance they don’t need rather than be uninsured in the future when they need it the most.

Author; Alex McKenzie Categories: Future Financial Services Blog

About the Author

Alex McKenzie

Alex McKenzie

Owner at Future Financial Services

Past:

  • Paraplanner at Zammit Partners Investments
  • Unit Trust Administrator at Colonial First State

Education

  • University of Western Sydney
  • Penrith High

About

As a Financial Planner I help people to achieve what they would like in life. This involves helping you to identify the things in life they would like , developing plans to help achieve them and strategies to protect what you already have. We do this by providing Financial Advice to guide you through your life stages.

The financial planning process involves determining a clients current situation and financial objectives and tailoring strategies to assist in best achieving those objectives.

I am an expert in superannuation, investments and insurance, these are tools we use to help you achieve your goals.

I aim to use my knowledge of superannuation, taxation and Centrelink to efficiently use your assets and income to achieve your financial goals.

Retirement and pre-retirement planning, wealth creation, asset protection, insurance planning and estate planning are all areas of advice that I provide.

Leave a comment

You are commenting as guest.