Many Australians choose to hold personal insurance through large super funds, drawn by the convenience and low-cost coverage they offer. But while this seems like a great deal on the surface, there are potential pitfalls that members need to be aware of—traps that can leave you underinsured or paying more than you bargained for. At Rasiah Private Wealth Management, we’ve guided many clients through these hidden complexities, and today, we’re shedding light on four key issues to watch out for. 

1. The Risk of Unitised Cover

One of the biggest traps is the way large super funds often structure their insurance as "unitised cover." This means that instead of paying for a fixed amount of cover, members purchase units of cover—each unit representing a certain dollar value. While this structure might work in your younger years, offering significant coverage at low cost, there’s a catch. 

As you age, the amount of cover per unit typically decreases, just when you may need it most. For many people, this reduction in coverage happens at the worst possible time—when they are older and potentially facing health issues. Unfortunately, this structure works in favour of the super funds and insurers, but it often leaves members inadequately covered. 

2. Ambiguous Medical Definitions 

Another concern is the lack of clarity around medical definitions in policies, particularly when it comes to income protection, trauma, and disability cover. It's essential to understand exactly what the policy defines as being “disabled” or “unable to work,” as definitions can vary. Furthermore, with medical advancements, conditions and treatments are constantly evolving, and you need to know whether your policy is keeping up with these changes. 

If your insurance doesn’t cover a particular medical condition, you could find yourself without a payout when you need it most. Ensuring that your policy is updated and provides comprehensive coverage is crucial. 

3. Customer Service and Claims Processing 

Insurance is something we hope we’ll never have to use. But when you do need to make a claim, that’s when you realise the true value of your coverage. Unfortunately, we’ve seen firsthand how challenging it can be to work with certain insurers and large super funds. In many cases, the claims process becomes a drawn-out ordeal, adding more stress during an already difficult time. 

It’s vital to ensure that your insurer has a solid reputation for customer service and efficient claims processing. Better yet, by working with a financial adviser, you can have someone in your corner to handle these complexities on your behalf, so you don’t have to. 

4. The Rising Cost of Insurance in Super 

Finally, we’re noticing a recent trend of rising insurance costs in large super funds. As more claims are being made—particularly by members who didn’t undergo medical underwriting—super funds are passing those costs onto members. Unfortunately, many people aren’t even aware of these increases until they see their premium deductions creeping up over time. 

The bottom line is, while large super funds may seem convenient, it’s essential to stay informed and proactive about your insurance coverage. The lowest-cost option may not always be the best fit for your needs in the long run. 

The Takeaway 

Insurance through a super fund may seem simple, but it’s rarely straightforward. You need to make sure you’re not just paying for convenience—you want to be confident that your family is adequately protected in case the unexpected happens. At Rasiah Private Wealth Management, we’re here to help you review your insurance cover, make sure it’s aligned with your needs, and protect what matters most. 

If you’re unsure about your current coverage or would like an expert to review your insurance options, get in touch with us today. We’ll help you make sure your family is safeguarded against life’s uncertainties.