Is Opt-in Super Insurance the Only Option?

It may seem surprising, but a lot of Australians aren’t sure what happens to the super contributions made by their employers. Around 14 per cent of Gen Y had never, didn’t know how to, or couldn’t be bothered to check their super fund, according to a study from Finder.com.au. It seems, however, that super funds are well aware of this confusion or lack of interest and count on it. According to money expert Bessie Hassan from Finder.com.au, only 42 per cent know how much they have in their super fund.

What Fees are You Paying?

Administration, investment, exit, and switching fees are just some of the charges deducted from super balances, some of those on a regular basis. Those costs can add up and eat away at your savings, particularly if you don’t have a regular contribution going in or if you have more than one super account. On top of this, super funds will often provide customers with a default insurance option, meaning an insurance premium will also be deducted from the balance of the account.

man holding piggy bank

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Why do people get insurance through their super fund? There are a few compelling reasons including cost, convenience, easy acceptance and flexibility with cover. Firstly, as funds purchase policies in bulk, they’ll often be cheaper than for individuals. Secondly, premiums are deducted from the balance of your fund, so it’s straightforward and easy to manage. Thirdly, some funds don’t require you to do a health check. Lastly, you can generally decide the amount of cover you need. So, for people who otherwise wouldn’t have any form of life insurance, superannuation is a simple way to manage it.

That all sounds great, except there are some major limitations, particularly for young people. Firstly, default cover is limited and not tailored to the consumer. Secondly, it’s not portable so you can’t take your cover with you if you change funds. Thirdly, if you make a claim it could take a long time to get any money. This is because the insurer will pay the super fund who will then pay you. Lastly, premiums can rise if you switch jobs as some funds default members as smokers or blue-collar workers.

Are New Government Super Measures the Answer?

The federal government proposed the ‘Protecting Your Superannuation Package’ in the 2018/19 Federal Budget. This will come into effect from July 1 2019. Insurance will now be opt-in rather than the current default, opt-out system. This will apply for super members under 25, accounts that have not received contributions in 13 months, and members with balances less than $6,000. Admin and investment fees will be capped at 3 per cent on low balance accounts with less than $6,000, and all exit fees have been banned. Australians paid over $52 million in exit fees 2016/17.

These measures seem are a positive step towards protecting young people and those with small balances from unnecessary fees. However, with less people opting in, premiums will rise for those who want to keep their cover. Rice Warner published the ‘Federal Budget Impact – Insurance’ report and believe the new system will raise default premiums. They estimate that the cost for Income Protection (IP) will go up a huge 20.4%. Death insurance and Total and Permanent Disability (TPD) will increase by 6.6% and 8.2% respectively.

So What is the Answer?

As we reported last month in the article “How Health Insurance Discounts Really Affect Young People”, insurance companies rely on young people paying fees for services they are far less likely to use in order to ensure policies remain affordable for everyone. It’s hard to keep everyone happy ­– opt-in super insurance benefits young people and those with small balances, and the current system keeps premiums down for those who rely on their super insurance. You should consolidate your super, either through your fund or the MyGov website. By keeping your money together, you minimise fees and make it easier to keep an eye on the account. Always keep your personal and contact details updated so you don’t miss important updates from your fund.

Words by Isabelle Laker

Indifference to Injections Accounts for Pain to Travellers’ Hip Pockets

Are you planning a trip but not sure if you want to fork out for all those needles? It can be a tough choice, especially if you’re usually perfectly healthy. Getting vaccinations before going overseas can feel like a pricey and pointless expense. However, it could save you a lot of hassle down the track. By avoiding injections not only do you risk contracting deadly diseases, but also voiding your travel insurance policy. Travel insures may not cover medical costs if the reason you’re sick is because you haven’t had the recommended vaccinations.

Increasing access to developing countries brings the potential contraction of some diseases either eradicated or highly uncommon at home. Food and water borne diseases are very common in many countries, and diseases such as cholera, malaria and yellow fever are prominent in areas lacking in sanitation.

The vaccinations required for your trip will vary according to your destinations. You can find full lists of recommended vaccinations on smartraveller.gov.au and should always see your GP before travelling. It’s also a great idea to register your trip with Smartraveller, an Australian Government website which will contact you in case of emergencies and keep you up to date on all the latest tips and health and safety warnings.

Woman at Airport

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Beyond getting those pesky injections, there are a few ways you can minimise your risk of contracting diseases.

  • Firstly, to avoid disease carried by mosquitoes such as malaria, dengue fever and Japanese encephalitis, try to avoid activities during dawn and dusk, wear clothing that covers your arms and legs but is loose fitting, wear insect repellent and always sleep in screened accommodation under a mosquito net.
  • Secondly, avoid feeding and petting dogs, monkeys, bats and other animals when travelling abroad. Rabies is a disease spread through the saliva of already-infected animals.
  • Thirdly, be conscious of the food and water that you consume. Drink bottled or treated water in certain countries as local tap water may not be safe to drink. If that’s the case where you’re going, be careful of consuming ice or salads which can often contain untreated water. Other foods included unpasteurised dairy products, raw or reheated meat and seafood should also be avoided.
  • Lastly, it may seem obvious but good hygiene practices are essential when travelling overseas (as well as at home). Washing your hands is the single most important thing you can do to stop the spread of diseases, according to The US Centre for Disease Control and Prevention. Because you’re exposed to so many different germs as you pass through airports, stations, hotels, taxis (you name it!) when travelling, you should be washing your hands thoroughly and often.

Of course, these measures cannot prevent everyone from falling ill when travelling. It’s important to find an insurance policy that’s right for you and will cover you in case of such emergencies – and get the right injections!

Words by Isabelle Laker

‘Lazy Tax’ Causes Aussies to Lose Out

Have you ever heard of the lazy tax? Well it turns out, unless you’re shopping around before renewing your car insurance policy, you’re probably paying it. Despite evidence that premiums go up every year, a new study shows that Australians are overwhelming loyal to their insurers. But is it loyalty or simply laziness costing us hundreds of dollars more each year?

Last month, comparethemarket.com.au published a survey that examined the purchasing habits of 1000 Australian adults who have comprehensive car insurance. It found that a massive 89 per cent of people renewed with the same insurer as the previous year. Additionally, 69 per cent have stuck with the same insurer for more than two years. This includes a huge 30 per cent who have been loyal for two-to-five years, 15 per cent for five-to-10 years, and 24 per cent who haven’t changed insurers for more than 10 years. The most loyal age group were over 55s, with 41 per cent of respondents staying with their car insurers for over 10 years.

Toy car

Image: pixabay.com

Are they getting the best deal? According to the study, 81 per cent of people were aware that their car insurance premium goes up every year. Even if you get the best possible deal when you sign up, you may be paying more when you renew. Spokeswoman Abigail Koch from Comparethemarket.com.au notes, “If you’ve been with an insurer for two years plus, there is typically a better deal out there.”

So, what would it take for Australian motorists to switch policies? 42 per cent of those surveyed said it would take a jump of 10 per cent on their premiums. For 32 per cent of people, that figure is over 15 per cent. It seems like it would take a lot more than the average five per cent hike of last year for most people to make a change.

Given the high rate of depreciation on most cars, it’s worth seriously considering just how much you’re paying for insurance. As Ms Koch states, “You’ve got to question why you’re paying more each year when your car is worth less.”

Words by Isabelle Laker