Hi Nicole,
I am in a superannuation fund chosen by my employer. It includes total and permanent disability insurance, death cover and income protection, for which I pay a fee. I have cystic fibrosis and diabetes and have had a double lung transplant. Would my super insurer still cover me if I were to ever claim or is it a waste of money? There was never any disclosure of the price. A percentage of my wage just went to my super.
![Are you covered?](/web/20170206103219im_/http://www.smh.com.au/content/dam/images/g/t/l/d/t/r/image.related.articleLeadwide.620x349.gu413q.png/1486342094077.jpg)
Adam, Sydney North Shore
I know it sounds like some kind of conspiracy to take your cash Adam, but this is pretty standard. Default super funds, now called My Super, have to offer insurance and the premiums come out of your contributions or fund. Typically, life and total and permanent disability (TPD) cover will be an automatic opt out-type situation, while income protection insurance is often opt in.
So you're lucky to have the lot – and doubly so, given super may be the only way you'd actually get covered given your health problems.
Stand-alone insurance is what's called individually underwritten. That means medical certificates and examinations to assess whether you're a "safe" bet to insure – after all, insurers don't want to pay out if they can help it. Individual underwriters may well conclude your combined medical conditions represent too great a "cumulative risk".
Michael D'Apice, managing director of insurance specialist Austbrokers Financial Solutions, backs me up: "Adam is very unlikely to get cover outside of super. There are certain conditions insurers can tolerate but they'll load the premiums."
So the key question is whether the premiums you're paying now, through your super fund, are for nothing.
Group insurance has no individual underwriting; they save all that expense and just accept everyone. This means insurance in super has historically been far cheaper than out of it – the idea is that healthy members "cross-subsidise" the less so.
But accepting everyone has recently sent claims through the roof, such that some insurers have even lost money on it. RiceWarner Actuaries says the "challenging" years for insurers started in 2013 and TPD providers have been especially hit.
Besides hiking premiums to cover higher claims costs, some super insurers have also slapped on "pre-existing conditions" bans. And Adam, that's what would thwart you.
Two courses of action:
1. Trawl the product disclosure statement, and any additional insurance literature, for those words.
2. Call your super fund – many offer a free advice service and they should be able to tell you in no uncertain terms if you are wasting your money.
If so, cancel your cover so you can instead use the premiums to build your super faster and, in any case, make an extra salary sacrifice should you be able to – the cover you have is unlikely to be enough. On hardship grounds, you can access super early.
Nicole Pedersen-McKinnon is a money educator and consumer advocate: themoneymentorway.com. You can write to her for help solving your money problem, or with a consumer question, at nicolehelps@fairfaxmedia.com.au.