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Super fund insurance prices show wide variation

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Premiums for insurance within super funds are showing wide variation even within similar risk groupings, a Rainmaker Information study says.

Findings show a 25-year old with standard life insurance could have cover from $50,000 to more than $600,000 and weekly premiums could range from 45 cents to $7.80.

“Super funds providing the most insurance cover aren’t always the most expensive,” Rainmaker Head of Superannuation Research Stephen Fay says.

“Members who don’t compare their super fund’s insurance premiums run the risk of paying hundreds of extra dollars each year in insurance charges for potentially the same level of cover.”

Fund members in higher risk jobs will on average pay twice as much as those in lower risk jobs, but the level of cover and premiums also range widely within the risk categories.

Super funds are the biggest supplier of life insurance in Australia, providing cover to 11 million account-holders.

Rainmaker says premiums are usually much cheaper than if an individual bought the insurance independently and the average price of cover is about $3 a week.

The average weekly cost of default cover is lower for not-for-profit funds than retail funds.

AIA provides 28% of insurance within super, followed by TAL with 26%. AMP, CommInsure and MetLife each have a 10% share, Rainmaker says.

The study examined 15,000 insurance deals on offer through 220 superannuation products.