Superlink: What is it?
Is it a bird? Is it a plane? No, it’s Superlink!
Despite its catchy name, Superlink is a reference to superannuation, not superheroes. It’s a powerful tool that allows you to link up the life insurance in your super to a life insurance policy outside of your super. We’ve put together a guide explaining more about how this works and the pros and cons of using it.
- Superlink lets you link the life insurance policies inside of your superannuation fund with life insurance policies outside of your superannuation fund.
- Benefits of Superlink include freeing up cash flow, paying with pre-tax dollars, and potentially accessing an expanded definition of life cover.
- Drawbacks of Superlink include paying tax on benefits paid through life cover in super and a reduced total benefit level if claims are paid out.
- Superlink is also known as flexilink.
Superlink—also called flexilink—connects two or more separate life insurance policies, saving you money on your premium and unlocking additional coverage options.
With Superlink, one life cover policy sits inside your super fund. You can then link this policy to a second, external policy that sits outside of your fund. The external policy can include cover types such as Trauma, Income Protection, or Total and Permanent Disability (TPD). Allowed policy types vary by insurer, as different insurers offer different product ranges.
Superlink gives you the ability to free up your cash flow while retaining your life cover by splitting up the way you pay your premium. In other words, you can customise your super payments: part of your premium is paid through your super, and part of it is paid directly to your insurer. You can choose the way you want to split up the payments, as long as you adhere to the terms and conditions set by your insurer.
You can also avoid doubling up on policy fees by using Superlink. When you have multiple policies from the same insurer, you may even get a bundled discount, saving you even more.
Superlink also lets you leverage the tax benefits of superannuation by paying premiums with pre-tax money through super. However, keep in mind that any benefits paid out from life cover in a superannuation fund may be subject to tax. Benefits paid out from life cover outside of super are usually tax-free.
Many insurers only offer a full range of benefits to customers whose policies are fully funded outside of superannuation. With Superlink, you can gain access to some features that are usually not available through life cover in super.
Superlink and TPD Cover
Occupation definitions are an important component of TPD cover. Policyholders can usually choose to be covered under one of the following occupation types:
- Any occupation: Any job you are trained in or qualified to perform.
- Own occupation: The most recent occupation you worked in.
Generally, TPD cover through super is restricted to ‘any occupation,’ which means you must be totally and permanently disabled, unable to work in any capacity, before you are covered.
With Superlink, you can hold your TPD policy outside of super so some insurers will give you access to the ‘own occupation’ definition. Always read the Product Disclosure Statement (PDS) as policy terms and conditions vary by insurer.
What is TPD Cover?
Total and Permanent Disability (TPD) cover pays a lump sum if you are permanently disabled and unable to work.
Superlink and Income Protection Cover
Superlink may also make the Specified Injury Benefit available. If you experience an injury or illness listed in the PDS, you may be paid out an advance monthly benefit or a lump sum.
The way this works is essentially by splitting the policies. You hold part of the policy in your super fund, and it is subject to the restrictions of life cover through super. The other part of the policy is held outside of the fund.
When a claim is made, it is usually first assessed by the rules of the in-super policy, then assessed against the out-of-super policy.
What is Income Protection Cover?
Income Protection Cover pays out a percentage of your regular income for a set period of time if you are unable to work due to injury or illness.
When you make a Superlink claim, your benefit may be split. For example, let’s say you make a TPD claim. The claim may first be assessed under the broader ‘any occupation’ definition in your super. If you meet this definition, then the benefit may be paid out from the cover in your super.
If you do not meet the ‘any occupation’ definition, the claim may then be assessed against the ‘own occupation’ definition in the policy outside of super. If successful, it is paid out from the external policy.
Keep in mind that life cover benefits paid through a super fund are funneled through the super’s trustee before they are paid to you or your beneficiaries.
Superlink claims are usually paid out in one of three ways, depending on your policy structure:
- Benefit paid to the trustee of your superannuation fund
- Benefit paid directly to you
- Benefit split between your super’s trustee and you
The other consideration for Superlink policies is that any TPD or Trauma claim paid out will be subtracted from your total life insurance benefit. These policies are essential under a shared benefit umbrella, which will become smaller if a portion of it is paid out.
- 1 $100,000 TPD benefit
- 2 $250,000 Trauma benefit
- 3 $500,000 Life Insurance benefit
- 1 $100,000 TPD benefit
- 2 $500,000 Life Insurance benefit
The advantages of Superlink lie in its flexibility and money-saving powers.
- Pay premiums through your super using pre-taxed funds
- Free up your regular cash flow while retaining life cover
- Balance your life cover policies and tailor your payment structure
- Possible discount for bundled policies
- Save on policy fees
- Access expanded policy features that are typically unavailable to life cover in super
Superlink does have its drawbacks, so you should be aware of them before making any policy decisions. After all, even Superman had his kryptonite!
- Benefits paid out through super are subject to tax
- Benefits paid out through super are subtracted from your total benefit amount
- Benefits paid out through super are paid to your super fund first
Ultimately, the decision to use Superlink is a personal one, and it will depend on your financial situation. It’s a good idea to speak to a financial adviser for advice on how Superlink could help you manage your life cover. If you would like further information regarding superlink, or still have questions, you can speak to a life insurance adviser now. Simply fill out your details below or click here.