You may have received correspondence from your superannuation provider regarding insurance. It appears that these have been sent regardless of whether you have insurance inside your super! Below is a recent correspondence between Geoff and a client, “John”.

Hi Geoff,

I have received the following letter which talks about insurance inside my super? I am confused as to what this is referring to. Are you able to provide me with some further information?


Hi, John,

You and, reading the press, several hundreds of thousands of other superannuation members have received this type of letter following a well-intentioned change to the legislation – and you, like many of those other letter recipients, are confused as to why you have been sent the letter.

The change to the legislation was well-intended, to protect super fund members who had insurance through their super funds but were not making contributions (valid short-term strategy as it leaves very necessary cover in place when the member’s cash-flow may not allow them to pay the cost otherwise) – end result if no action is taken; the cost of the insurance premium chews through the investment portion of the fund so that, eventually, the investment portion of the fund is used up paying insurance premiums and the insurance policy is lapsed eventually because of unpaid premiums. The member ends up with no insurance and no superannuation.

This most commonly happens in employer funds where the member changes jobs frequently and fails to consolidate their superannuation funds, rationalising their insurance benefits. (The worst case I have come across in 20 years of advising was a client who had had 15 funds where 8 funds had been cancelled because of this.) There may be health reasons why a member wants to leave their insurance in an old super fund BUT they must make sure that there are at least annual roll-overs between their current fund and the old fund to cover the cost of the insurance so that they don’t lose their insurance. So, that was the intention.

Unfortunately, the super funds have had something of a knee-jerk reaction to what they have to tell to whom, so have sent out much, much more information than they need to, to members that they don’t need to (you, in this case) and have just confused the majority of letter recipients. The most sensible sentiment expressed in the letter is that “you do not need to respond or take any action” – unless you think you may need some insurance through your super fund any time soon! Insurance that you do through someone else other than us, as we make sure that adequate funds are in the right place at the right time, to make sure the premium costs are covered.

I hope that makes sense to you, John – a bit long-winded but you may have friends who get a similar letter that you can help out.


Hi Geoff, wait, are we talking life insurance?

Yes, John, it’s life, total and permanent disability and salary continuance insurance – and yes, as far as we’re concerned you don’t have any – and as far as your super is concerned you don’t but they are covering themselves in case you do this at some point in the future! Which you couldn’t do, by the way, as you are over the age of being able to apply for these types of insurance.


If you, or anyone you know has received such correspondence and would like to discuss further, please do not hesitate to get in touch.

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