Let’s face it, it’s a good idea to review your life insurance every year or so to check that the premiums are reasonable and your coverage is appropriate. But this year it’s even more important with changes to the amount you can contribute to your super.
One of the biggest changes to super, commencing 1 July 2017, is the cut to contribution caps – the amount people can get into super without being penalised with extra tax.
So, with less able to go into your fund and life insurance premiums coming out, you may struggle to reach your retirement goal.
Is it worth it?
Whether or not you purchase life insurance through your super depends on your situation
For example, take a couple in their mid-30s who are new home-owners and new parents. Their premium is likely to be only a few hundred dollars and it may make sense to continue paying it out of super.
Cashflow is going to be tight but they’re going to need some protection, so funding it through super is a viable option.
On the other hand, a couple in their 50s who would like to leave funds to their adult children, may need to think twice about it and get advice for their own situation. It may not be the best option because there are potential tax considerations when paid to non-dependents.
Older investors with some debt and high premiums will also need to review their life insurance cover carefully.
How to work it out
Sit down with your financial adviser or risk insurance specialist and look at your assets, liabilities, cashflow, and whether you’ve got a sufficient balance inside super, advises Korn.
The insurance industry is an ever-changing beast, and so is super,.
Insurers are constantly reviewing their pricing, making sure it’s competitive but also ensuring it’s in line with their claims history.
Yearly reviews are not only a good chance to look for a better insurance product and to check whether you’re under- or over-insured as your circumstances change.
A lot of people have something happen during the year – they’ve had a baby, bought a house, paid off a loan, received an inheritance
Their first thought isn’t ‘I should see what I should do with my insurance’. But those kinds of events affect insurance.
And don’t forget…
While you’re reviewing your life insurance, check your binding death benefit nomination. The nomination tells to the super fund trustee who should receive your super benefits when you die so you’ll want to make sure that it’s still relevant to your current circumstances.