What are the benefits of income protection through my super?

Published 31 Mar 2015

Income protection can be an important type of insurance coverage for people who are concerned that a serious injury or long-term sickness could have a significant impact on their financial stability.

For example, if you are a small business owner or self-employed, being away from the workplace for a long period of time could have substantial ramifications.

Securing income protection insurance means you will receive a proportion of your salary – typically up to 75 per cent – a month until you are recovered.

You can access this type of cover either through a superannuation policy or through traditional insurance coverage – but what are the differences? This article will outline some of the benefits and drawbacks of relying on your superannuation benefits to cover your income protection claim.

The benefits

One of the primary benefits of super-based income protection is that you will often receive cover as part of a group policy. This typically makes your agreement cheaper, as it will be assessed at wholesale prices.

Furthermore, the group policy element means you are likely to be automatically accepted for coverage. You may not need to take a medical exam and members’ premiums are often the same across the board, regardless of health and other factors, such as smoking.

Coverage should also be available whatever your occupation. While a standalone policy might have restrictions on high-risk professions, super benefits will still protect you.

There could be tax benefits through your super, as you are paying for cover using your contributions, which are levied at a concessional cap of 15 per cent.

The disadvantages

Not all features of superannuation-based insurance policies are advantageous – there are some drawbacks you may want to consider.

Firstly, while coverage is often more affordable, there tends to be tighter restrictions on how long you can receive benefits for. You may also find the policy is not as comprehensive as agreements arranged with a retail provider.

The claims process can also be challenging, as you must prove eligibility to both the trustee of the super fund and the insurance company backing the scheme. Once approved, the insurer pays the money to the fund, which then passes the payments onto you – a process that can cause delays.

However, if you are experiencing a dispute over income protection payments, you should contact an experienced superannuation lawyers such as Gerard Malouf & Partners to help you settle your case.

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