Insurance cancellations inside super

 Why is this happening?

Many Australians have insurance inside their super account – the cost of which comes out of their super balance. Yet some don’t realise they have this insurance and may be paying for cover they don’t need or want.

These super law changes aim to protect peoples’ retirement savings by preventing super balances from being eroded by the cost of insurance when it’s not wanted, as well as the cost of other fees. 

What’s in the new laws?

There are different parts:

The first part, called Protecting Your Super, focuses on super accounts which are inactive (haven’t received a contribution or rollover) for 16 months. 

If an account becomes inactive for 16 months, the insurance inside the account must be cancelled unless the client requests to keep it. 

• By no longer having Life insurance (also known as death cover), if you die, your dependents or other beneficiaries will not receive insurance benefits from your super account.
• By no longer having Total Permanent Disability (TPD) insurance, you will not receive any lump sum benefit if you become permanently disabled due to illness or injury.
• By no longer having Temporary Salary Continuance (also known as Income Protection), you will not receive a monthly benefit (up to 75% of your pre-disability income and subject to a waiting period) if you are not able to work for a period of time due to illness or injury.
• By no longer having Temporary Total Disablement Cover, you won’t receive a monthly benefit (up to 75% of your pre-disability income and subject to a waiting period) if you become Temporarily Totally Disabled due to illness, accident or injury.

It’s important to understand your insurance, to know what’s right for you. Here are some things to think about:

• It can be complicated for certain people to get insurance. Eg, if you have a pre-existing medical condition and your current insurance is cancelled under the new laws, you may not be able to reinstate your cover to the same benefit level or get insurance elsewhere at the same cost.
• Product features like waiting or benefit periods can also vary between policies. Please check your most recent statement or product disclosure statement.
• Payments for insurance inside super come out of your super balance, which means the balance can be reduced by costs over time. This is especially important when an account is inactive or has a low balance. This could reduce the amount of money available for you in retirement.
• Make sure you understand the details of insurance inside super.
• Some employers negotiate special deals for their employees, which you could be benefiting from.
• You can get an idea for what your insurance needs might be by using our insurance calculators.
• Your financial adviser can help you determine what insurance is right for your circumstances.

If you do nothing, and your insurance is cancelled as a result, you may be eligible to reinstate your cover. Alternatively, you may be able to apply for new cover and supply health information. This information would need to be assessed as part of your application. It may not be possible to reinstate your insurance on the same terms or at the same price. And, in some circumstances, you may not be able to reinstate your cover at all.

It can be complicated for certain people to get insurance cover. For example, if you have a pre-existing medical condition or work in a dangerous occupation.

If you have more than one AMP super account with a balance below $6,000 and you’d like to keep the insurance in each, you’ll need to act in one of the ways provided, for each account.

You’ll receive a notice from us about the insurance in your account if you’re impacted by these laws.

Remember, if you have two accounts with the same type of insurance (from one or more super providers), you may be paying for insurance you don’t need. In particular, for Temporary Salary Continuance (Income Protection), you will most likely only be able to claim up to 75% of your pre-disability income (offsets may apply), regardless of whether you hold it in two accounts.

It might be a good idea to speak with your financial adviser about super and insurance to meet your personal circumstances.

How should I respond?

• If you decide to keep your insurance, you can fill out the online form or paper form provided, or contribute to your super. Details are provided in the notification we sent you.
• If you decide you’d like your insurance cancelled, you don’t need to do anything. Your insurance will be cancelled on the cancellation date provided. Otherwise, you can cancel your insurance before then by contacting us on 1300 363 267.
  

No.

The request form tells us you want to keep your insurance, even if you have a low balance or the account becomes inactive in the future. We won’t need to ask if you’d like to keep it again.

Making a contribution to your super account

On the other hand, if your account is about to become inactive, making a contribution or rollover (of any amount) into your super account before it becomes inactive, means your insurance will not be cancelled for now. However, your insurance may be cancelled in the future, if your account doesn’t receive another contribution or rollover for 16 months.

If we don’t hear from you in one of these ways before the cancellation date provided, your insurance will be cancelled.

We’ll write to you to let you know if this happens.

If you decide to keep your insurance, you can fill out the online form or paper form provided or contribute to your super. These details will be in the notice sent to you.

If you’ve recently made a contribution or rollover into this account and the balance reached $6,000 or more, your insurance will not be cancelled for now.

Your insurance may still be cancelled in the future if the account doesn’t receive a contribution or rollover for 16 months. We’ll get in touch before this happens.

Can I still make an insurance claim on events that occurred before the cancellation date?

Yes.

Please call us if you have any questions.

If you have a claim with us, these laws won’t impact your claim, and we’ll continue to support you throughout the process.

However, you'll still need to tell us if you'd like to keep your insurance, claim on another insurance type (TSC, TPD or Death), or claim on the insurance inside your super account in the future. Call us for more information on 1300 363 267.

Rohan, part-time worker and student

Rohan is 21. He works 20-hours a week at a department store while finishing his science degree. His AMP super account has a balance of $5,600 and includes $50,000 life insurance - which he pays for via his super account. Since Rohan started his job, he hasn’t given his super or insurance much thought.

On 25 November 2019, Rohan received an email from AMP saying his insurance may be cancelled under super laws, because his account balance was below $6,000. Rohan was busy and decided to deal with the email later. When Rohan received a reminder, he went to the insurance cancellations web page to find out more.

Rohan also entered his details in the AMP insurance needs calculator.

After considering the results, Rohan decided he was happy with his level of insurance and should keep it. He filled out the keep my insurance form and put a reminder in his diary to think about his insurance again in 12 months.

Emile decided to cancel her insurance early

Emile is in her early 20s and works and studies part-time. Emile rents with five other students and receives government study assistance. She has a $4,000 super balance plus Life and Total and Permanent Disability (TPD) insurance included with her super.

When Emile received a letter from AMP saying her insurance may be cancelled under super laws, she wanted to find out more. Emile did some online research into how much insurance she should have at her age and life stage, and spoke with some trusted friends. She then decided she was better off without any insurance for now.

Emile called the AMP call centre, and had her insurance cancelled earlier than the cancellation date, so she could stop paying any further premiums. Emile was glad to know she was saving her money for retirement.

Sylvia just landed her first job

Last year, Sylvia finished her HSC, and couldn’t wait to finally start earning money! She applied for loads of jobs and got one in November. Her new job came with a default super plan that included insurance for life, Total and Permanent Disability (TPD) and Temporary Salary Continuance (TSC). All the details about her super and insurance were included in the welcome pack she received, as well as details about how new super laws require insurance to be cancelled for people whose balance is below $6,000, unless they elect to keep it.

Since Sylvia’s account was only recently opened, she only had $350 from her first two super contributions in there, so she knew she could be affected by this law.

Sylvia received a reminder about the cancellation in February, and did some digging via the ASIC money smart website, and used their life insurance calculator. In the end, she decided to keep her life and TPD cover, but she didn’t want TSC at the moment.

Sylvia called AMP to cancel her TSC, and while she was on the phone, they talked her through how to keep her life and TPD cover (via the online form). It was done and dusted quickly and Sylvia was glad she was no longer paying for the portion of insurance she felt she didn’t need.

Michael just took out more insurance

Michael is 40, married with two young children. He has life insurance which he applied for five years ago and, at the time, went through underwriting to receive it. This insurance is held in a super account with a balance of $1000, and he regularly transfers money into the account to pay for his insurance premiums.

In November 2019, Michael and his wife met with a financial adviser for a financial health check and were advised to take out TPD insurance on top of Michael’s existing life insurance policy, to ensure he was covered in the event he became disabled.

After completing the underwriting process via his adviser, Michael’s policy was approved in mid-January. In the meantime, Michael’s adviser told him about the super laws cancelling insurance in low balance super accounts. Since Michael’s insurance is held in a super account, he is at risk of losing only his new TPD insurance.

AMP also called Michael to explain the situation and sent him an email detailing how to keep his TPD insurance. Michael filled out the paper application form and emailed it back to askamp@amp.com.au.

Leyla doubled her life insurance

Leyla is a single mother of her 17 year-old son, Felix. Last year, Leyla had $500k worth of life insurance held in a super account. She had applied for this insurance previously and went through an application process to receive it.

In late November 2019, Leyla bought a house! This reminded her to reassess how much insurance she should now have. Especially because she didn’t want Felix to have to worry about paying off the home, if she passed away.

Leyla used the AMP insurance needs calculator to better understand how much insurance she should take out, and decided she needed to increase her life insurance cover to $1m. Leyla completed an application and she was approved. AMP confirmed in January her insurance had increased to $1m, and what her new monthly insurance premiums would be.

While Leyla had a large amount of insurance, her super balance was just under $6,000. In February, Leyla received an email from AMP explaining that super laws will require them to cancel the additional $500k of insurance cover, unless she requests in writing to keep it or she increases her super balance to at least $6,000. (Under the super laws, the first $500k is not affected because her original application was made before November 2019).

AMP also called Leyla to explain the situation and sent her an email with all the details, including how to keep her insurance. Leyla replied ‘yes’ to the email stating that she wanted to keep her insurance.