Published 18 Oct 2017
Default group insurance, as the name suggests, is automatic life cover provided to members of superannuation funds across Australia.
Total and permanent disability (TPD) cover and income protection are two examples of policies commonly included in default group insurance.
However, critics of the system have argued that default insurance unfairly penalises certain members, such as young people, by eroding their retirement savings through policies they are unlikely to need.
Nevertheless, a recent KPMG report highlighted a number of benefits that default group insurance provides for members, including potential TPD claimants.
TPD and income protection insurance can provide significant financial assistance for superannuation members who suffer accidents or become ill, enabling them to support their loved ones while out of employment.
This is particularly useful for people who work in high-risk occupations and may struggle to find sufficient cover elsewhere.
Superannuation funds buy cover in bulk. This means the insurance they provide is far cheaper than most people will be able to obtain through separate policies.
There is also less underwriting with superannuation insurance, meaning members face fewer health tests and questionnaires.
KPMG found that only 50 per cent of individual insurance premiums are paid back to members through claims, while 40 per cent go towards the insurer's expenses and commissions.
Meanwhile, super fund members appear to get more bang for their buck, as 80 per cent of premiums are funnelled back to people via claims and just 12 per cent of money is spent on the fund's costs and commissions.
People who don't have default group insurance may have to rely on the Disability Support Pension if they become sick or injured and cannot work.
Funds can shoulder much of this burden, leaving more money in public sector coffers for other front-line services. For instance, KPMG estimates that default group insurance can save the federal government between $3 billion and $4.2 billion over 10 years in income protection benefits alone.
While default group insurance provides much-needed financial support to people who are unable to work due to injuries and illnesses, not all insurers pay out on claims.
This may occur even when the individual is making a legitimate claim according to the policy's requirements, which is why you should contact a superannuation disputes lawyer to pursue your case if your claim is rejected.
Get in touch with Gerard Malouf & Partners Superannuation Lawyers for more information on how to proceed with your claim.