AustralianSuper has negotiated with its insurer to allow members early access to life insurance benefits, in addition to their super balance, in cases where they have less than 24 months to live.
The fund’s decision follows recent government changes to regulations, which enable individuals certified to have a terminal medical condition, by two medical practitioners, the ability to gain early access to their superannuation savings.
However, Richard Weatherhead, head of insurance product at AustralianSuper, cautioned other funds that under the new regulations members might inadvertently make themselves worse off. For example, if a member is diagnosed as terminally ill and withdraws all of their super there could be nothing left to pay the insurance premium, so they could find their insurance lapses.
“This is one of the reasons we wanted to move quickly because there’s a fear this might have happened to our members,” Weatherhead said. “At just that worst time of your life you make an inappropriate financial decision to cash in your super and when you do die your family is left with nothing.”
He added aligning the insurer’s terms and conditions with the new superannuation condition of release would also help alleviate any extra stress or hardship at an already difficult time.
“This will go some small way towards making a member’s life more comfortable and allow them and their families a greater level of dignity and financial security,” he said.
Annemarie Gambera, insurance lawyer at Slater and Gordon, also warned superannuants to consider the effect that early access to their superannuation could have on their existing superannuation insurance policies.
She added insurance benefits can be worth tens or hundreds of thousands of dollars depending on the fund and may not be available once the super funds are withdrawn and the account shut down.
“It is important that people with a terminal illness are aware of their full entitlements and that they do not miss out on what is rightly theirs,” she said, urging them to seek independent advice.
Overall she was supportive of the changes to regulation saying giving terminally ill patients even earlier access to their superannuation funds make sense and was good policy.
The old regulations meant members living with a terminal medical condition had to wait until their doctors certified a life expectancy of less than 12 months before they could access their superannuation.
The change to extend the life expectancy provision from 12 to 24 months took effect from July 1, 2015, and applies to members of AustralianSuper’s Industry, Finsuper and Personal Divisions. There will be no change to members’ insurance premiums before the next premium review.
Richard Weatherheaed will both be presenting Case study: driving change and innovation – the trustee journey at the 4th annual Group Insurance Summit in Sydney on August 19, 2015.
To register for the conference visit https://www.eiseverywhere.com/ereg/index.php?eventid=125466&