Dollar-a-week to go towards life insurance

Australians should contribute a minimum of one dollar per week to death insurance cover through their superannuation fund, while more needs to be done to educate the public about the potential pitfalls under choice of fund, according to a new submission to the Federal Government.

The Rice Walker Actuaries response to the Government’s choice of fund consultation paper said that making the minimum level of life insurance cover one dollar per week would be the best way to ensure that Australians get the best insurance they can for their money.

The paper recommended against basing the minimum level of insurance cover solely on a total sum-insured, aged-related scale where the amount of cover reduces as age increases.

Rice Walker Actuaries principle Rhonda Virtue says the dollar-a-week approach allows for more flexibility.

“Don’t set a sum insured, because if you set a sum insured what happens is you end up with people, who for what ever reason might need more cover, thinking ‘oh well that’s what the Government says so it’ll do’,” she said.

Virtue said that choosing the one dollar approach doesn’t rule out the option of basing premiums on age and also allows for total permanent disability (TPD) insurance to be included in an insurance arrangement as well as death cover.

Rice Walker recommended that employees be allowed to opt out of receiving death insurance cover but only if they receive an appropriate ‘health warning’.

They also called for a more comprehensive Government education campaign across the board.

“Prosecuting industry participants who fail to adhere to consumer protection legislation will not be enough to protect member’s financial interests. A continuing financial education programme will be essential,” the submission said.

“The government must make a further effort to educate those employees who must make a choice - including the choice of ‘doing nothing’”.

Virtue says the government could do this by introducing media - especially television - education campaigns.

“Education, education, education, we can’t reiterate it more. People need to know. This needs to have alarms all over it.”