Super insurance should be linked to Tax File Number
Australians could be losing hundreds of thousands of dollars in retirement savings by having multiple sets of total and permanent disability life and income protection through numerous superannuation accounts, an investment analyst believes.
Good Super managing director, Andrew MacLeod, called for TPD life and income protection insurance policies to be tied to Australians' tax file numbers, with second and third policies made opt-in, instead of opt-out as is currently the case.
"The average Australian has three superannuation accounts," he said.
"If you have a mid-level coverage for TPD life and income protection insurance in each of those accounts you'll pay about $24 a week in combined insurances - that's $1200 a year per set of insurances, multiplied by three sets of super accounts, if you have insurance on all three.
"Let's assume as a 20-year-old you need on set of insurances¬ that means $2400 worth of premiums is unnecessary¬ $2400 on eight per cent compounding over 45 years is $118,000 of lost capital on retirement.
"If you do nothing about it over the entire period of your super it could be north of $1 million of lost capital for a product you're already paying for.
"[If you] make it compulsory to have tax file numbers associated with TPD life and income protection insurance and then make people actively opt-in to have more than one account¬ if you change that you'd solve the problem on that insurance issue."
While MacLeod has called for in super TPD life and income protection to be optional for Australians with more than one super account, he said there was a "huge under insurance problem" in Australia.
AUTHOR
Nicholas O'Donoghue
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