Implications of insurance in super misleading

Examples from DEXX&R on the implications of insurance in superannuation on a member's final balance are misleading, according to a superannuation and insurance lawyer John Berrill.

Berrill said while the theory that as a result of the proposed concessional contribution cap members could cop a significant reduction in their finance balance if they held insurance benefits inside super, it only represented a tiny proportion of fund members.

"They are misleading because they don't represent the level of TPD [total and permanent disability] level income protection cover that the vast majority of people have got," Berrill said.

"Only a tiny tiny proportion of members who are aged 35 have got $2 million of death and TPD cover and a tiny percentage of members who are over 55 have $1 million in death and TPD cover and $12,000 a month in income protection.

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"It's only the high net worth white collar members who'd have anything like that sort of cover."

Berrill said the average 35 year old member would have around $200,000 to $500,000 in death and TPD cover, while a 55 year old member on average would have an income protection cover of $3,000 to $6,000.

"If it's designed to illustrate the effect on the average member account balance of insurance premiums then the examples don't do that," he said.