Income Protection: should every fund offer it?
Income protection (IP) insurance within super has become a more common feature within superannuation offerings, but should every fund offer IP cover to their members? Here is a look at both sides of the coin.
There are many benefits to providing IP cover to members within super, either as a choice or default option. As the premiums are taken from the members’ accumulated superannuation savings, they don’t have the added stress of having to cover the cost from their take home pay.
This opens up insurance to a whole range of members who may not have the cash flow capability to fund it by their own means. With one in three Australians at risk of becoming disabled for at least three months before the age of 651, having at least some insurance cover is seen as highly desirable.
Members can also make or increase salary sacrifice contributions to match the premium payments, thereby reducing their taxable income, similar to a policy held outside super.
However, as IP cover can be a more costly cover to provide Trustees must carefully consider the needs of their membership to determine whether IP cover is best offered as a default or choice option
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