Mondy Financial Services


What are these changes & why are they being introduced?

From 1 July 2019, new ‘Protecting Your Super’ laws come into effect. These laws include several measures designed to ensure that super account balances are not being unnecessarily eroded by fees and insurance premiums, particularly for accounts that have a low balance or have been inactive for a certain period.

One of these measures relates to automatic cancellation of insurance cover for inactive super accounts. These rules prevent super funds from providing insurance cover to you if your super account is inactive, unless you specifically elect to keep your cover. Under these rules, an account will be considered ‘inactive’ if it has received no contributions or rollovers for 16 consecutive months.

Important things to think about before deciding to keep, cancel or change your cover

Just like your home or car, your life and your ability to earn an income can be some of your most important assets. Having insurance cover may provide some financial protection if you are unable to work due to disability or if you die.

There may be some advantages of having insurance through your super, e.g. group premium rates may be more cost-effective than individual insurance rates, and paying for premiums through your super rather than your after-tax money may be tax-effective in some cases. However, it’s important to be aware that insurance premiums that are deducted from your account balance will reduce the amount of super that is available when you retire.

Your insurance needs can change over time so the cover you had in the past may or may not still be suitable for you today. For example, your needs for financial protection as a young single may be different to your needs if you have dependants or a mortgage. And if you’re downsizing or an empty-nester, your needs may be different again.

It’s important that you regularly consider and understand your current needs to make sure any insurance cover remains appropriate. This should include any cover for death and disability that you have through super, as well as any cover you have with an insurer.

It’s also important to understand the features of your cover, such as premium rates, when a benefit may or may not be paid, and exclusions that may apply. These features will generally be different between super funds or insurers, so you’ll need to consider what’s right for you.

You should also keep in mind that premium rates will generally increase as you get older.