If you haven’t looked at how your superannuation is tracking, it might be time to review your life insurance. Were you aware that Government passed legislation which may mean your insurance changes as of 01 July 2019. From 01 July 2019, APRA-regulated funds may not provide insurance to members with inactive superannuation accounts, unless a member has directed otherwise.
Why have insurance in an APRA-regulated Fund
Many individuals including SMSF members also have APRA-regulated fund which provides them with insurance.
This may be done for two key reasons:
• To access insurance policies provided through large superannuation funds which are often cheaper.
• To keep legacy insurance policies which may offer better benefits or lower premiums than new policies, especially for older members.
For those with an SMSF holding life insurance polices through an APRA-regulated super fund will generally consider that their SMSF is their primary superannuation account. It is their SMSF which may receive all their contributions and roll-overs. These people will leave enough money in their APRA-regulated fund account to cover the cost of insurance premiums. If required they may rollover funds from their SMSF to their APRA-regulated fund or make a contribution to pay for insurance premiums and administration fees to keep their insurance policy.
What is the Insurance Change
Under the new legislation, you now may lose your insurance cover if your APRA-regulated fund is considered inactive because it has not received a contribution or a rollover for a continuous period of 16 months.
At 1 July 2019, if your APRA-regulated fund is considered inactive for 16 months your insurance will be terminated.
APRA-regulated funds had until 1 April 2019 to identify members who have been continuously inactive for six months or more and now have until 1 May to inform those inactive members that their insurance will soon be switched off unless they elect to retain it.
We are concerned that insurance may have been unknowingly closed for these accounts because members have not checked their correspondence, especially for those who rely on this insurance held separately.
This could have a devastating impact on policy holders or their beneficiaries if their insurance cover was unknowingly terminated. Also, it may be extremely difficulty or costly to try and access insurance at a later stage of life.
What can you do?
It is important that if you wish to maintain your insurance cover that you take necessary steps as soon as possible. This includes either:
• Provide direction to your APRA-regulated fund that you wish to ‘opt-in’ for your insurance cover to be maintained.
• Make contributions or rollover to your ‘inactive’ APRA-regulated fund so that the period for which your fund starts to be inactive is reset.
How can we help?
If you are concerned you are affected by these changes or need assistance with your insurance, please feel free to call to arrange a time to meet so that we can discuss your particular requirements in more detail.
HQ Financial Group is a multi-disciplinary firm specialising in in taxation, accounting and financial advisory services to sole traders, individuals, and micro businesses. Our expertise in Taxation, Wealth Managements, Self Managed Superannuation Fund (SMSF) Services, Business Planning and Advisory, and overall Financial Management allows us to proactively provide trusted and balanced advice to our clients that saves both their time and money.