This common super error can cost you thousands – fix it in 60 seconds
Everyone has the option to have life insurance inside their super, but the majority of Australians could be getting overcharged.
Unless you've called or cancelled online, you're almost certainly paying for life insurance through your super.
Life insurance is automatically added to your super if you're over 25 and have $6,000 or more in your account.
The payments automatically come out of your super unless you go online and cancel – something I did a couple of years ago.
In other words, the life insurance inside your super is very easy to forget about. And maybe you're fine with that. After all, it's convenient and it's one less bill to worry about.
There's a major catch though.
Your insurance is priced based on risk. They can be broadly split into 3 categories:
- Standard – eg. a skilled worker with light manual duties, such as a retail worker.
- White collar – eg. a teacher, admin, you spend at least 80% of your time doing administrative or office-based work.
- Blue collar – eg. regular use of heavy machinery or heavy equipment; manual labour, such as regularly bending, lifting or carrying heavy loads; driving a motor vehicle for most of the day over short distances.
Most super funds default to blue collar, the most expensive group to insure. If you're a white collar collar worker then, it's likely that you're paying more than you need to.
In the past, this may have made some sense. Today though, over 60% of Australians are white collar workers, according to the latest census information.
What this means is that most Australians in their comfortable, air-conditioned offices are essentially paying for the risks associated with working on a construction site.
To get a sense of how common the issue is, I asked around the Finder office. Not one person was paying the premiums of a white collar worker.
Luckily, it's really easy to fix. Head to your super fund's website and there will be an option to change your occupation to a white collar worker.
Many of the Finder staff classed as blue collar workers did this themselves and it took them less than 60 seconds.
Once you've changed to a white collar worker, your premiums will either lower substantially and your payout will remain the same, or you can continue to pay the same in premiums which will increase your death benefit.
For example, a Finder employee was able to double their death benefit payout from $192,000 to $404,00 simply by changing to the correct occupation. Another was able to lower their monthly fee for death cover, TPD and income protection from $100 to $36.
If you've never checked the life insurance inside your super, consider taking a look now. You could be massively overpaying.