It’s a question that is asked frequently by clients, so we asked Carol Lobo from Wealth Lens to give some insights into weighing the Pros and Cons of holding some of your insurances within super and the importance of having regular reviews.
Carol explains “The decision to hold insurance within your superannuation fund is an important one, it has potential advantages and drawbacks. It’s important that you weigh up the pros and cons of holding your insurance within superannuation,. It’s also discuss the crucial aspect of reviewing your coverage periodically to ensure it aligns with your needs”.
The Pros of Holding Insurance in Super
1. Cost Savings
Pro: Opting for insurance through your super fund can lead to cost savings as you are able to bundle covers together might come with lower premiums compared to standalone policies.
2. Simplified Management
Pro: Managing all your insurance cover within the same provider can simplifies your financial organization. You can oversee both aspects conveniently and deal with a single point of contact for inquiries.
3. Cash Flow Benefits
Pro: Paying insurance premiums directly from your super balance can relieve financial pressure on your regular budget, ensuring that you can manage other financial commitments more effectively.
The Cons of Holding Insurance in Super
1. Limited Coverage Options
Con: Insurance policies within super funds might offer limited coverage options compared to tailored individual policies. This can affect the suitability of coverage for your unique circumstances.
2. Benefit Limitations
Con: Super funds might impose caps on insurance benefits, potentially affecting the payout you receive in case of a claim.
3. Reduced Retirement Savings
Con: Using a significant portion of your super balance for insurance premiums might impact your long-term retirement savings. It’s important to strike a balance between insurance protection and future financial security.
The Importance of Regular Reviews
The world is ever-changing, and so are your circumstances. This applies to your insurance needs as well. When was the last time you reviewed your coverage? Here’s why it’s essential:
As life evolves, your insurance requirements change. Marriage, children, buying a home—these milestones alter your financial responsibilities. Regular reviews ensure that your coverage is adequate to protect your loved ones and assets.
Keeping Up with Market Trends
Insurance products and market dynamics change over time. New policies might offer better features or value for money. Regular reviews help you stay informed about these developments.
Adapting to Health Changes
Your health can change unexpectedly. If your health deteriorates, obtaining new insurance might be challenging. By reviewing your coverage, you can address potential gaps early.
Adjusting for Career Progression
Career growth often means increased earnings. Your insurance coverage should reflect your changing income levels to ensure your loved ones are financially secure in the future.
Deciding to hold insurance within your super involves weighing the pros and cons. It’s a decision that should align with your financial goals and circumstances. Remember to review your coverage regularly, ideally annually, to make sure it still meets your needs. Life is dynamic, and your insurance coverage should be too. Take the time to review, assess, and adapt—it’s an investment in your financial well-being and peace of mind