Unveiling Default Insurance in Superannuation Policies

While many of us contribute to superannuation funds for retirement planning, what often goes unnoticed is the default life and disability insurance embedded in the policies’ fine print. Initially presented as a benefit for account holders, this insurance is automatically included by superannuation funds for members with a MySuper account holding a minimum balance of $6,000, unless individuals opt out. However, investigations by prominent bodies like the Australian Securities and Investments Commission (ASIC) have revealed significant flaws in this type of cover, leading to it being labeled as another form of ‘junk insurance

Why Superannuation Insurance Is Criticized as Junk Insurance

Despite its intention to provide default protection for Australians, superannuation insurance has come under scrutiny by agencies like ASIC due to its inconsistent costs and value across the market. Each year, account holders collectively pay over $4 billion, often without full awareness, from their retirement savings. Yet, the pricing and coverage of these insurance policies vary widely, with individuals paying different amounts for similar coverages based solely on their chosen superannuation product.

This discrepancy means that individuals with similar characteristics may be charged different prices and receive different levels of coverage. Particularly vulnerable groups such as young people, individuals with disabilities, and those in casual or part-time employment are disproportionately affected. Despite paying inflated prices for cover, they may face restrictive eligibility criteria, rendering their insurance effectively unclaimable. This issue is especially evident with Total and Permanent Disability (TPD) insurance policies.

What is Total and Permanent Disability (TPD) Insurance and How is it Mis-Sold?

Total and Permanent Disability (TPD) insurance is designed to provide financial support to individuals unable to work again due to a severe injury or illness. Often bundled into superannuation products, TPD insurance is included in the policies of over 10 million Australians, funded by contributions to their superannuation funds.

However, investigations by ASIC have revealed significant issues with TPD insurance, often labeled as ‘junk’ insurance. Many funds reject a substantial portion of TPD claims—upwards of 70%—based on stringent eligibility criteria.

There are two primary tests for TPD claims: the standard test and the Activities of Daily Living (ADL) test. The standard test requires demonstrating an inability to work due to injury or illness, which is relatively straightforward. Conversely, the ADL test assesses an individual’s ability to perform basic daily activities such as talking, walking, self-feeding, dressing, and using the bathroom. This test is more challenging to satisfy and lacks consideration for mental health issues.

The selection of tests for TPD claims often depends on the individual’s work hours. Those with low work hours or in hazardous occupations are typically subjected to the more restrictive ADL test. Consequently, individuals who are unemployed or engaged in non-permanent employment may struggle to meet the criteria for successful TPD claims, leaving them without the financial security they expected from their superannuation-funded insurance.

How to Claim a Refund for Junk Superannuation or Total and Permanent Disability (TPD) Insurance?

At Refundify, we boast extensive expertise in both the finance and insurance sectors. Our specialty lies in assisting individuals who have been mis-sold junk insurance policies or charged fees for services they never received in reclaiming the refunds they rightfully deserve. If you’ve been sold junk superannuation insurance, such as TPD cover for which you’re ineligible, we can manage the entire process for you. Rather than navigating the complexities of a class action lawsuit, we streamline the process to ensure you receive the maximum refund owed.

Here’s how it works:

1. Provide us with your details, including your superannuation and insurance contracts, if available. If not, we can assist you in obtaining this information.
2. Our expert team thoroughly review and analyze your situation, then reach out to you to finalize your refund claim.
3. We proceed to submit your refund claim(s) on your behalf, handling all the necessary paperwork and negotiations.
4. Finally, you receive your well-deserved refund for your junk superannuation insurance.