- Life insurance policies
From 1 April 2020, changes will take place that impact life insurance offered through superannuation funds.
Firstly, superannuation funds will no longer be able to automatically offer life insurance to new members:
- If the member is under 25 years of age; or
- The account balance for the new member is less than $6,000.
The legislation passed will see insurance become opt-in rather than default for members under the age of 25 from 1 April 2020. However, there are exceptions to this rule for those who are considered to be working in dangerous occupations.
Secondly, existing superannuation members, irrespective of their age, will have their life insurance cancelled if they have a superannuation balance below $6,000, unless:
- Their balance reached $6,000 at any point from 1 November 2019 at 1 April 2020; or
- Members have “opted in” to keep their cover before 1 November 2019 due to their superannuation account being inactive. Inactive means no contributions or rollovers have been received in a superannuation account for a continuous period of 16 months.
A strategy frequently used when setting up a Self Managed Superannuation Fund is to maintain your existing fund and life insurance intact with a minimum balance to pay the policy. These life insurance policies are at risk if you do not elect to maintain your insurance even though you have a minimal balance and in most cases, minimal activity.
If you have not seen an election form in the mail from your fund recently, we recommend you contact your superannuation provider and request a form. All elections need to be in by 1 April 2020.