Are you being stung by your super clinging to junk cover?

Despite many superannuation funds cleaning up their act and removing terms and conditions offering ‘junk’ insurance as part of their package, there are still funds clinging to these policies and they are putting the retirement savings of many at risk.

Super Consumers Australia has now taken to naming and shaming some of the funds that have not removed junk insurance from their offering, in an attempt to get the remaining laggards in line with the rest of the industry.

The consumer body says that a sustained campaign on the issue over the past two years has seen over half of the market remove or dramatically reduce the impact on junk insurance.

Read: Super funds want to provide pension eligibility advice

Director of Super Consumers Australia Xavier O’Halloran says that the remaining funds, including NGS, Prime Super and Spirit Super, have held onto policy terms that discriminate against people who are older, unemployed, working limited hours or are in hazardous occupations.

“Despite recent improvements in the sector, a worryingly high number of funds have chosen to sit on their hands and do nothing,” Mr O’Halloran said.

“This leaves people being charged for insurance policies they will find next to impossible to claim on.”

Read: The pandemic stock market mistake that cost Aussies thousands

Some of the super funds being targeted by the consumer body are still using ‘activities of daily living’ (ADL) tests to assess the ability of policy holders to work.

The Australian Securities and Investments Commission (ASIC) has previously found that these tests are difficult to pass and results in insurance that does not meet the needs of members.

The ADL tests have also been criticised as they only identify severe physical incapacity.

To get your insurance paid out where the ADL test applies, you generally need to show you can’t do at least two out of five of this list of basic activities:

  1. walking
  2. talking
  3. dressing yourself
  4. feeding
  5. bathing.

Read: Super fund fined $20m, paying $67m back

“The insidious nature of these restrictive disability tests means that people already in a precarious financial situation have inadequate cover if they can never work again,” Mr O’Halloran explained.

“Equally unfair is they make it much harder to claim for mental health conditions.

“Super funds that are clinging on to these terms need to follow the lead of their peers and financially protect people regardless of whether they are impacted by a mental or physical disability.”

Mr O’Halloran said that over the past 16 months his organisation had contacted funds with some of the most restrictive insurance policies on the market, asking them to remove the terms.

Some of the funds that have refused to comply are:

  • NGS Super
  • AMP
  • Telstra Super
  • Prime Super
  • Spirit Super.

On a more positive note, he said that eight of the funds contacted have dumped or will dump their junk insurance terms and an additional six have significantly reduced the impact of these terms.

“It’s positive to see that most of the funds we wrote to have either removed the terms or are well on their way to reducing the impact of the terms,” Mr O’Halloran said.

“They’re sending a clear message to the rest of the industry that these terms are out of date and put people at risk financially.”

The government’s MoneySmart website says that when checking the level of cover you have with your super, it’s a good idea to check for any exclusions in the policy for pre-existing conditions or high-risk occupations.

“When reviewing your insurance in super, see if there are any exclusions or if you’re paying a loading on your premiums,” it advises. “A loading is a percentage increase on the standard premium, charged to higher risk people. For example, if you have a high-risk job, a pre-existing medical condition or you’re classified as a smoker.”

Are you insured with any of the funds above that are still offering junk insurance terms? Does this make you want to stop paying for insurance through your super? Why not share your thoughts in the comments section below?

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Ben Hocking
Ben Hocking
Ben Hocking is a skilled writer and editor with interests and expertise in politics, government, Centrelink, finance, health, retirement income, superannuation, Wordle and sports.
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