Life Insurance Rollover

Want to increase or change the existing life insurance cover you have inside your super? Find out which brands offer superannuation rollover.

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Many Australians are now looking towards life insurance offered through their superannuation funds as an affordable option to provide life, TPD or income cover. Super funds work through different insurance companies to give members cover at an affordable rate and allow members to pay for their insurance through their super.

Is life insurance through super enough?

While it may be an affordable option, this default cover will not always provide an adequate level of insurance for the individuals needs leading many to seek an additional level of cover.

How do I still pay for cover through my super?

This is where a life insurance superannuation rollover can be used. Life insurance continues to be paid for with the complying super fund, but towards the policy you have switched to.

There are a number of insurers in Australia that now offer hassle-free rollover solutions with some offering a premium discount as an additional bonus. Keep reading to learn more about superannuation rollovers or enter your details in the form below to find a rollover solution with an insurance consultant.

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Coverage is the amount of money that you will be paid in the event of a claim. An insurance consultant can help you determine an appropriate amount. Calculator
Provides a lump sum payment if you become totally and permanently disabled and are unable to return to work.
Provides a lump sum payment if you suffer a serious medical condition. Cover can be taken out for 40-60 medical conditions depending on the policy you choose.
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So what is a superannuation rollover exactly?

A superannuation rollover is where a fund member transfers funds from a complying superannuation fund into a life insurance company's superannuation life cover plan. The money that is invested into the new life fund can be used to pay for the premiums for Life, TPD and Income Protection cover.

Applicants that want to become members of the providers superannuation fund that are a member of a SMSF will generally have to apply to become risk-only members. Applicants will have to meet certain eligibility requirements under superannuation law and may need to submit medical evidence to insurer. Applicants will need to be approved by the new provider before cancelling the insurance held in their previous fund.

Reasons to consider a life Insurance rollover from a complying superannuation fund

There are a number of reasons why someone might consider a life insurance rollover, these could include:

  • Not satisfied with the cover provided in original policy
    • Limited sum-insured
    • Limited benefits and features offered
    • Restrictive policy options. Restrictions around benefit periods, waiting periods, payment frequency.
  • Current fund may only offer certain types of cover.
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Transferring funds from existing superannuation

Risk-only funds will only accept transfers from complying superannuation funds where the amount transferred equals the yearly premiums for the cover held in the fund. Transfers between complying funds will usually require a proof of identity form to be completed.

Key responsibilities before rolling over

Before you rollover life insurance from super, there are some important responsibilities to cover:

  • Check super entitlements. Find out what type of effect the rollover will have on your super entitlements. T
  • Confirm pre-existing medical condition cover. If you were covered for pre-existing medical conditions under your super policy, make sure the cover will still be upheld under a new policy.
  • Ensure that the account balance of your super fund is enough to enable a rollover. If the level of cover is greater than your existing insurance, there's a chance that a higher amount of your super contribution is taken to pay
  • Check the minimum account balance requirements. Ensure that your super fund is able to keep up with it's minimum account balance once the rollover happens.
  • Authorise the rollover. Authorise and pay for fees to your superfund to enable the rollover
  • Confirm the change in responsibility. You will discharge the trustee of the external super fund from any further liability in respect of rollover benefit once the amount is transferred to us.
  • Find out if there any additional requirements from your external super fund. This can include proof of identity

Common conditions of transferring insurance

  • Impact on sum-insured: The sum insured will be increased to account for the existing sums insured and that which has been transferred.
  • Policy loadings and exclusions: Loadings and exclusions applied by the previous insurer will generally still apply.
  • Payment of premiums: Premiums are usually automatically deducted from the members fund.
  • Increase on sum insured: Members can usually apply to have the sum insured that was provided by their previous fund increased.
  • Cooling off period: If the member does not want to proceed, they will need to advise the insurer within a set period (usually 14-30 days). In the event of a cancellation, the cover will be cancelled and premiums paid back to the members account.
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How to rollover life Insurance from a complying superannuation fund

The process for rolling over life insurance from a superannuation fund to a life insurance company will differ from company to company but generally the applicant will need to find an insurance company that their super fund is compliant with. The applicant will then need to submit an application to have their insurance held by the new fund. Once this has been approved the applicant will cancel the insurance held in their previous fund.

Rollover tax to be aware of

People that are interested in making an insurance rollover should be aware that a tax may be applied up front and each year following as part of the new arrangement. As an example, BT will charge 15% on contributions.

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Insurance through an adviser and direct life insurance

Unfortunately, most insurers will place restrictions on the benefits and features for policies that are funded through superannuation. Another option for people with only default cover through superannuation is to look to applying for a standalone policy outside of super or by purchasing direct. Benefits of doing so include:

  • Benefit payments to non-dependents are free from tax.
  • Benefits paid directly to policy owner. Straightforward claims process.
  • Greater range of policies available.
  • Ability to tailor cover to match specific needs.
  • Income protection premiums are tax deductible.

Purchasing life insurance direct means buying directly from the insurance provider as oppose to going through an adviser. There are a number of benefits to this method of purchasing.

  • Fast and straightforward application process. Cover can be purchased completely online or over phone.
  • Rarely requires medical underwriting. Applicants that do not present significant risk are not required to undertake medical underwriting.
  • People who know what they want do not need to undertake research and comparison process.

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