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Most workers and business owners know that their superannuation includes some sort of insurance, but what is it?

The big question could also be, what insurance do I have in my super that I’m doubling up on?

We’ll look at these questions and more in our comprehensive guide to tradies insurance in superannuation.

A little warning first…  There are hundreds of different superannuation products available from dozens of different funds in Australia.  The following information is quite broad, and we recommend speaking with a financial adviser before making any decisions about your own cover.

Quick Q&A

To get started we’ll answer a couple of quick and common questions regarding tradies insurance in super:

Q:  As the insurance is included in my super by default, does that mean it’s free?

A:  No!  Whilst it is “included” by default, your super fund will be debiting monthly or annual fees to pay for the insurance cover.

Q:  Is the insurance in my super the same quality as the other options out there?

A:  Broadly speaking, no.  We’ll go into more detail below, but the insurance in your super will typically be more limited than insurance outside of your super.

What insurance is in my super?

There are typically three different types of insurance you might find in your super:

  • Life Insurance
  • TPD Insurance (Total & Permanent Disability)
  • Income Protection Insurance

The first two will be included by default in virtually all retail and industry super funds, whilst income protection is less common depending on the fund type.

At Trade Risk we help tradies with all three of those types of insurance, so you might now be thinking, why do I need Trade Risk’s help when I’m already getting it in my super fund?

It’s a great question, but relatively easy to answer.  We’ll now look at each type of cover separately.

Income Protection

We’ll start with this one is it’s the most common for tradies out of the three.

First up, not all super funds are going to include income protection as a default.  It’s more common in the industry super funds, and even then, often only when it’s been negotiated in by a union.

This still doesn’t mean the cover is “free” though.  The premiums will still be deducted from your super balance.

Even if your super fund doesn’t include income protection as a default, they may have optional cover that you can opt-into.

To give you an idea I’ve looked at the options with SunSuper.  Why SunSuper?  They’re one of Australia’s largest funds with 1.4 million members, and I happen to have my super with them.

I don’t have my income protection with them however, and I should point out that Trade Risk has no dealings with them whatsoever.

SunSuper have no default income protection, but do have an “opt-in” option and a “tailored” option.

Opt-In

The opt-in cover is quite basic, with only a two-year benefit period and a 90-day waiting period. 

That means you’d need to be away from work for around three months before you were eligible to claim, and would only be paid for a maximum of two years.

The opt-in policy does not cover self-employed tradies, and covers up to a maximum of $5,000 per month for non-whiter collar workers.

So it’s very basic, but it’s probably a “get what you pay for” situation and would certainly be better than having no cover at all.

Tailored

The tailored option offered by SunSuper sounds to be more like the income protection that we would offer our clients at Trade Risk.

You can bring the waiting period down to a more reasonable 30 days and the benefit period out to age 65.  The policy can also cover the self-employed, which is vital for most of our clients.

The maximum cover jumps right up to $30k per month, which should be sufficient for all but the very highest earning tradies.

All super funds are going to vary slightly, but that should give you some idea of what’s on offer.

Life Insurance

Life insurance is very simple in that it pays a lump sum if you die.  It’s very black and white in many ways.

The main limitation on default life insurance in your super fund will be the limits available.  Standard cover may only be a couple of hundred thousand, and although you’ll generally have the option to increase it, the overall limits are still typically low.

You might think that a few hundred grand is a lot of money, but if you’re a young tradie with a mortgage and family, that money will be gone in a flash.

If you want a more appropriate amount of cover that will pay off your debts and leave some money to look after your family, you’ll need to speak with a financial adviser like at Trade Risk.

TPD Insurance

TPD stands for ‘total and permanent disability’.  This type of insurance will pay a lump sum in the event that you are unlikely to ever return to work.

Typically this is based off two medical professionals giving their opinion that you are unable or unlikely to ever work again.

So we’re talking about completely life changing injuries here.

Most super funds will provide a default level of cover TPD in the same way they do for life insurance.  A couple of hundred grand as standard, and perhaps the ability to bump it up.

The big difference between the TPD insurance a tradie can get inside of superannuation compared with outside of superannuation is the definition.

TPD is available with two different definitions: ‘any occupation’ or ‘own occupation’.

What’s the difference?  With ‘any occupation’ the policy would pay out if you were unable to work in any occupation that you might be suited to.

For ‘own occupation’ the policy would pay out if you were unable to work in your own occupation.

Let’s say you’re a carpenter and you lose an arm in an accident.  It’s fair to say you couldn’t continue as a carpenter on the tools.  It just wouldn’t be practical.  So you’d likely be paid out if you had the ‘own occupation’ definition.

But if you had the ‘any occupation’ definition, the insurer might say you could still work as a site supervisor, or maybe a trade teacher at TAFE.  There are plenty of jobs you might still be suited to that you could do with only one arm.

You can see here that the policy with an ‘own occupation’ definition would have been much better, as it’s the only one that would have paid out.

In superannuation, there is no option for ‘own occupation’.  Any TPD policy in super will be the inferior ‘any occupation’ definition.

That’s a major consideration when deciding whether you’re happy with the insurance in your super, or if you want to deal with a financial adviser.

Using a Financial Planner

There is another option for tradies wanting insurance via their super fund, which is to use a financial planner.

A financial planner can setup your income protection, life, TPD and trauma insurance within a superannuation fund, but without being limited to the standard options within an industry fund.

This can potentially give you the best of both worlds, by still being able to access top quality cover, but having it paid via your super fund to assist with cashflow.  We know how important cashflow is to any trade business.

Here at Trade Risk we have an in-house financial planner who specialises in assisting tradies.

He can review the existing insurance types you have in your superannuation, as well as being able to provide advise on adding insurance through your super.

Insurance via superannuation can be a very complex area, so we strongly recommend seeking advice from a financial planner before making any decisions or taking the DIY approach.

To book in a free no-obligation chat please call our office on 1800 808 800 or contact us online.

Tradies Insurance in Superannuation

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In 2017 Trade Risk was awarded a Gold Trusted Service Award for the amazing service we offer to thousands of tradies from around Australia.

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