Ask Paul: Have I outgrown the insurance in my super?
Karen has built a healthy super balance and reached a stage where her children are standing on their own feet. So when does insurance inside super stop being essential protection and starts eating into your retirement savings?
Reader question
My super regularly deducts premiums for death, TPD and income protection insurances.
I have had these set up for years and have never really looked at them. As I'm now over 50 and my kids are adults and (relatively) financially independent, should I stop some/all of these insurances? It would save me a lot each year.
I have a super account balance that is heading towards $800,000 and I'm regularly saving more into it outside payroll contributions.
I have an investment property that is only slightly negatively geared.
I have no other debt and my husband is financially independent with his own job, super and insurances.
Is this a way to save some money and keep more of my money earning and growing in super, rather than being sucked up by fees and charges? - Karen
Paul's response
The day I was able to cancel all my life insurance and income protection cover was a day I much enjoyed, Karen.
My wife and I were also around age 50 and when doing our 'financial security' numbers we realised that with three adult kids, no mortgage and little other debt, we no longer needed life cover.
Which, incidentally, was just as well as it was getting quite expensive.
Please do your numbers carefully, but with your large super balance, an investment property that is only slightly negatively geared and your husband also in a strong financial position, it seems to me you no longer need this type of insurance cover.
Have you outgrown your insurance?
You may be able to reduce or cancel some insurance cover if:
- Your children are financially independent
- Your partner could manage financially without your income
- Your mortgage and major debts are paid off
- You've built substantial super and other assets
- You have enough savings to cover an extended period off work
But think carefully before cancelling cover. If your circumstances change or health issues arise, it may be difficult or expensive to obtain new insurance later.
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