Understanding IP insurance – And why it’s important to make sure you keep yours updated
What is IP insurance?
IP stands for ‘income protection’. Like the name suggests, if you can’t work due to illness or injury, IP cover helps to replace your lost income. After 60 days of being off work, your IP cover may kick in and cover you for up to two years[1].
Around 10 million Australians have insurance through their super[2], and if you’re a Super Saver member with Vision Super, you may be one of them.[3] If you’re working full time or part time, our default insurance cover includes death cover (also called life insurance), total and permanent disability (TPD) cover and IP. In this article, we cover some of the questions members typically have about their IP cover.
How’s my IP cover calculated?
When you joined the fund, your employer told us what you were paid. We used that amount to calculate your IP cover. Our default cover replaces 75% of your wages[4], not including any overtime or allowances – so for example if your normal pay when you joined was $1,000 a week, your IP cover would pay you $750 a week if you were sick or injured for an extended period.
My pay has gone up since I joined – does that mean my IP cover has gone up too?
No! Your IP cover doesn’t automatically change, because Vision Super doesn’t get notified when your pay goes up. But as long as you let us know within 60 days of receiving a pay rise, we’ll increase your cover for you without you having to provide any medical or personal details for our insurer so they can do the process known as ‘underwriting’. Limits on the increase of units apply. Simply complete the Insurance application/variation form (Form2) by downloading it here https://www.visionsuper.com.au/wp-content/uploads/2021/02/form2.pdf fill it out, provide the required information and return it to us via email or through the post.
You can also get an increase without going through a full underwriting process when you have what’s known as a ‘key life event’ – things like getting married or starting a new de facto relationship, having a baby, or buying a new home. You can find the key life events form here: https://www.visionsuper.com.au/wp-content/uploads/form320.pdf – you need to complete the form and get it back to us less than 90 days after your key life event.
Why is it important to change my IP cover?
For most of us, our circumstances and financial commitments change over our lives. Most people would want their IP cover to be able to pay the rent or mortgage, and the monthly expenses and bills – and that changes as we move through life. What might have been the right amount of IP when you started out in the workplace as a young single person renting with flatmates probably isn’t the right amount of cover if you’re married with young kids and a mortgage! And similarly, if you’re getting towards retirement age, the kids have moved out or the mortgage is paid off, you might not need as much cover to ensure your living expenses could be paid if you’re unable to work.
Making other changes
If you’re not yet eligible for default insurance because you’re under 25 or your account has less than $6,000 in it, you can opt in early. Cover will commence from the date we receive your request and a superannuation contribution from your employer. .
You can apply to increase your IP cover from the default 75% to 85% – the extra 10% will be paid into your Vision Super account, helping your retirement savings to stay on track even while you’re temporarily unable to work.
You can also apply to increase the length of time you get paid IP for if you make a successful claim – from two years to age 65, or shorten your waiting period from 60 to 30 days.
It’s important to note that taking up or increasing your cover, extending the length of time you’d get paid for or reducing your waiting period will all mean you pay higher premiums, which are paid from your super. Over time, this will mean less in your super than there otherwise would have been.
And of course, you can always reduce the amount of cover, or cancel your cover entirely if it doesn’t suit your needs.
You can make changes by completing our insurance variation form and (if needed) a personal statement. Requests for increased cover, longer benefit periods and shorter waiting periods are subject to assessment and approval by Vision Super’s insurer.
We recommend you regularly review your insurance cover to ensure it’s still right for you, and let us know if you want or need any adjustments. We can also refer you to our financial planning team if you need advice.
For further information on our insurance, including the main terms and conditions and where offsetting will occur, refer to the Insurance in your super – additional guide.
We’re here to help
Superannuation and insurance can be complex. If you need assistance working out how much cover is right for you, or help applying for cover please call our Member Services team on 1300 300 820 Monday to Friday 8:30am to 5pm.
[1] Benefits are paid monthly in arrears, the Super Saver default IP insurance has a 60-day waiting period, and will be paid for up to two years.
[2] https://asic.gov.au/about-asic/news-centre/articles/insurance-through-super/
[3] Government rules mean you must be employed permanently, be 25+ years old and have an account balance of over $6,000 to get default insurance. In addition, our rules mean you must have joined the fund via a participating employer, your employer must pay a superannuation guarantee amount into your Vision Super account within six months of you turning 25 or your account balance reaching $6,000 and for IP, your annual salary must be over $7,999.
[4] Up to a maximum of $30,000 per month
