While self-managed super funds have taken almost a third of the superannuation market in terms of assets, many of their members have left themselves out in the cold when it comes to insurance cover. After leaving the membership of large funds with their competitive group insurance, the vast majority of SMSF members go without fund-provided insurance. In the November issue of its Touchstone newsletter, Rice Warner Actuaries tags SMSFs as the “forgotten” superannuation sector in regards to life insurance coverage. This is perhaps a tellingly accurate description. (See Latest News). Rice Warner reports that just 13% of SMSFs provide insurance cover to their members. This compares to the near-blanket coverage of the big funds. “Some insurers have identified this as a growth opportunity but we have yet to see any significant inroads being made into the SMSF market,” the actuaries and superannuation consultancy says. And then the newsletter adds some key points about insurance pricing and the possible mindset of many new SMSF members when it comes to insurance. “Risk insurance established through SMSFs is generally individual (retail) cover which does not benefit from prices and levels of default cover without [medical] evidence that large superannuation funds can obtain,” according to Rice Warner. “These factors are often forgotten when individuals establish SMSFs, and are a particular issue for those in less than good health as they may face the prospect of significant premium loads or, indeed, being declined if they apply for individual cover subsequently.” One of the overall thrusts in the Rice Warner report is that insurance coverage is a matter that should not be overlooked when considering a change of funds. This, of course, applies when thinking about a change to any type of fund. Some SMSF members leave sufficient superannuation savings in a large superannuation fund, partly for existing group insurance benefits. This point should be carefully checked with both your current fund and your adviser.
19th-November-2010 | 
