From 1 April 2020 a change in government legislation regarding insurance cover commences. This change stems from the ‘Putting Members Interests First’ (PMIF) laws aimed at targeting the erosion of low balance super accounts as a result of insurance premiums for cover members may not want or need.
Who could lose their cover?
Your insurance cover may be automatically cancelled if you meet the following criteria:
Your super balance was below $6,000 on 1 November 2019 and remains below $6,000 on 1 April 2020; or
You joined your fund between 1 November 2019 and 1 April 2020 with a balance that does not reach $6,000 at any time before 1 April 2020; and
You have not specifically made an election (in writing) to retain your cover with your super fund.
Exemptions may apply for insurance benefits if they are paid completely by your employer or you are engaged in a dangerous occupation.
If you have met the above requirements your super fund should have notified you that you may be at risk of losing your life insurance cover. It is important this correspondence is not ignored if you wish to retain your cover.
What you need to do?
If you hold a super account that meets the above criteria and/or you have received correspondence notifying you of the pending cancellation of your cover, and you wish to retain your insurance cover, please contact your super fund or financial adviser to ensure the appropriate action is taken. Any correspondence you have received from your super fund regarding this action should also provide instructions for you to retain your cover.
Changes beyond 1 April 2020
The cancellation of superannuation life insurance cover, as detailed above, is a one-off action to occur on 1 April 2020. After 1 April 2020, super funds will stop offering insurance for new members aged under 25 or members with an account balance of less than $6,000. These members will need to make a written election to obtain insurance.
Please contact your super fund or Prosperity adviser for further information.