What you need to know first
Are you looking to close your super fund account to switch to another? Before you switch funds there are a few risks that you should consider, including a gap in insurance cover and restriction of cover for pre-existing injuries. Read on as we unpack the hidden risks of switching funds.
Two things to look for when switching super funds
1 – New-Member Insurance Waiting Periods
Each superfund has slightly different waiting periods when changing supers. If you close a superannuation fund you will also have your insurance cover canceled along with the account. While signing up to your new superfund you will need to tick the box to confirm you would want life insurance cover on your policy and specify any pre-existing health conditions you have. Once you complete the paperwork there will generally be a wait period before you are covered for insurance.
Automatic cover only applies for people who’s employer sets up their superfund. If you set-up your superfund yourself, you need to opt in for insurance cover.
For TPD insurance, this waiting period is generally around 3-6 months. Each superfund will have a different waiting period.
2 – Pre-existing medical conditions
If you change superfunds, you may not necessarily get the same level of cover you are currently on. Your insurance premiums may be higher at your new superfund, if at the time of changing you are considered higher risk. For example, if you have a pre-existing medical condition or if you work in a field of work which carries a higher risk of injury.
They will also consider if you are currently receiving benefits and if you are employed. All these factors will be analysed and your insurance premium costs will be based on this.
Switching Funds
Whilst these risks are important to be across, this shouldn’t discourage you from switching super funds if this is the right decision for you. To ensure you are covered whilst changing funds, simply ensure your new replacement policy is issued while you keep your current insurance running.
TPD insurance, an insurance which is paid for with your superfund retirement savings. and is important when times may become tough if you are unemployed due to illness or injury – you can claim a lump sum payout from your insurance.