IOOF says one of two main ways clients can hold retail insurance in super is by establishing an insurance-only super fund independent of the member’s super fund with the insurer’s trustee owning the policy.
IOOF insurance specialist Peter Stathis said this method increases the complexity of insurance arrangements, but it also increases the risk of an inadvertent policy lapse.
“With insurance cover held in a different super fund the possibility of a lapse is naturally higher,” Mr Stathis in a statement.
“If a member changes jobs and starts contributing to a new super fund, there’s a real risk the original super fund eventually won’t have the funds to cover partial rollover contributions.”
IOOF suggests another approach is to take insurance cover on the client’s regular super fund.
The advantages are that the premiums are deducted automatically from the client’s cash account, generally monthly, half-yearly or annually, reducing the likelihood of an inadvertent policy lapse, IOOF said.
It added that, when integrated in a platform, pension options are available, which are not available as standalone super-held policies, meaning the death and total and permanent disability (TPD) benefit may be converted to a pension account for the beneficiaries or the member.
Shrinking premium gap my a*$#. IOOF are among the worst offenders for group life rates. One of my clients is stuck on death & tpd cover underwritten by TAL through his IOOF super at more than 100% above market rates.
Agree, but only IF it all runs smoothly. A very recent experience of placing a client’s new Life Office ‘A’ insurance policy within the IOOF platform [rather than using partial roll over] saw several issues develop – firstly due to client error – secondly with original annual premium payment request rejected, new policy would ‘lapse’ if payment not made within ‘X’ number of days. Life Office ‘A’ then came back to say they could not re-debit annual premium for 2 months after a ‘rejection’ from IOOF. Very messy and real risk of a lapse for a bran new policy.