Many Aussies rely on their default cover in their superannuation to be ‘enough’ when things go wrong… if they give it much thought at all!
What a lot don’t realise though, is that cover can expire when an employer stops paying in to some funds, and that at age 65, cover may also cease altogether (especially if you plan to withdraw the funds at that stage!)
Another issue that many face, is that their cover is ‘unitised.’ This means that they may maintain a certain number of units of cover at a set cost per week, but these units decrease in value over time as you age, although premiums remain constant.
Premiums being deducted from super may be just what you need to have ‘some cover’ that doesn’t interfere with your cash flow too, but over time, the premiums also erode your retirement savings nest egg.
Relying solely on default insurance may leave you with nowhere near enough for your family’s needs, just when they need it most.
When thinking about how much is enough for your needs, many start with clearing debt as their main priority and this is hugely important.
Another vital area to consider is the level of income that the family will miss over the coming years. e.g. Put very simply, if you earn $50k per annum and have 20 years of working life left, there’s $1 million in income the family will never see (without any adjustments for inflation.) Do you need to include this level of cover in your plans for future expenditure on school fees, retirement savings and more? Maybe, or maybe not.
Working out ‘how much is enough?’ is vital, and chances are, you may well find there’s a gap with your default super settings.
Take the time to understand what you have, what you need and chat to a professional. Advice is invaluable in arranging the most appropriate levels of cover for you.