Brought to you by:

Lawyer warns of insurance trap for Australians tapping super early

Facebook Twitter LinkedIn Google

Drawing from superannuation balances early may wipe out insurance available via super funds, Australians are being warned.

By accessing super before the preservation age conditions are met, Australians may leave themselves without cover for total permanent disability (TPD), income protection, life insurance, trauma insurance or terminal illness cover, law firm Slater and Gordon says.

Commenting on the fact that many people affected by the summer bushfires are “doing it tough” she says they should understand “the consequences of draining your super account to invest in something as significant as rebuilding your life now”.

“Doing this could cause you to lose all insurance benefits available to you via your super membership.”

There are very limited circumstances which allow superannuation to be accessed early, and Ms Gambera says people withdrawing part or all of their super balance prior to retirement for financial hardship reasons should understand the risks.

It is crucial for people to check with their super fund and read relevant policies before applying to access their super early, as individual circumstances are dependent on the insurance arrangements which the super fund has in place.

“What people need to know is that if there is no money in the superannuation account balance to pay the insurance premiums, the cover will lapse,” Ms Gambera said.

She says alternative solutions for emergency relief funding, such as the Federal Government’s one-off and ongoing disaster relief payments for affected individuals and businesses, should be considered.