What is superlinked life insurance?
- 1 What is superlinked life insurance and how does it work?
- 2 What types of life insurance policies can be superlinked?
- 3 Why would I superlink my policies?
- 4 How do payouts work with superlinked policies?
- 5 Potential benefits of a superlinked policy
- 6 Potential drawbacks of a superlinked policy
- 7 What happens if you need to make a claim on superlinked insurance?
Superlink is a way of ‘linking’ policies inside and outside your super fund, It can be a handy option if you want more flexibility in how you pay for your life insurance premiums as it cuts down on immediate out-of-pocket expenses.
But there are also restrictions on the type of cover that can be held within super, as well as the conditions you have to satisfy to make a successful claim.
This guide covers everything you need to know about how superlinking works, including restrictions, advantages and disadvantages.
- Superlink allows you to split your premium payment so that a portion is paid through your super fund and a portion is paid out-of-pocket.
- Premiums paid via superannuation are typically eligible for a 15% rebate.
- Superlinking is available for income protection (IP) cover and total and permanent disability (TPD) cover.
Superlink – which you may hear referred to occasionally as flexilink – allows you to split your retail life insurance policies with a portion that sits inside your super fund and the remainder outside of your super fund. This remainder is paid for out of your own pocket.
Superlinking can only be done with two types of life insurance:
- Income protection (IP): IP cover pays up to 75% of your gross income, usually monthly, if you can’t work temporarily as a result of injury or illness.
- Total and Permanent Disability cover (TPD): TPD cover pays a lump sum if you can’t work again due to permanent illness, injury or disability.
Some common reasons people choose to superlink their policies include:
- Keeps out-of-pocket expenses low: IP and TPD through superlink cuts down on your out-of-pocket expenses, as a portion of the payment is made using your superannuation fund contribution.
- Discounted premiums: Premiums paid via superannuation are typically eligible for a 15% rebate.
- More comprehensive coverage: Allows you to access all of the benefits available with your TPD and income protection policies that may otherwise be unavailable if you’re funding your policy entirely through superannuation. This is due to the conditions of release that superannuation funds have around accessing the money in your super.
To understand how payouts work with superlinking policies, we’ll need to dive a little bit deeper into some definitions of Total and Permanent Disability cover.
There are two primary definitions for TPD:
- Own Occupation pays out if you make a claim because you can’t work permanently in your own occupation at the time of your claim.
- Any Occupation pays out if you make a claim because you can’t work permanently (through TPD) in any occupation suitable for your experience, education or training.
Funding a TPD policy solely through your super fund will only allow you access to the Any Occupation definition. This is because Own Occupation isn’t available inside your super fund.
But superlinking your TPD cover and paying a portion of the premium out of pocket means you’re eligible for both Any Occupation and Own Occupation.
Let’s look at an example to illustrate the difference between the two.
A mechanic has an accident that requires their arm to be amputated. Under Own Occupation, they’re likely to be entitled to a benefit payout because they can no longer perform their day-to-day work as a mechanic.
But under Any Occupation they may not get a benefit payout. Our example may no longer be able to work as a mechanic. But their insurer may decide they can work in another job based on their education, training or experience.
Granted, not many of us will be losing arms. But this should help you see the difference between Any and Own Occupation and how it may affect the likelihood of receiving a benefit payout depending on which policy you hold.
There’s a number of benefits to a superlinked policy that some people may find useful.
- Cash flow: You can share the cost of a policy with the money in your super fund. This can make a life policy more affordable than paying the premium solely out of pocket.
- More ways to claim on your policy: Superlinking means you can claim on an Own Occupation policy outside your super, as opposed to the more restrictive Any Occupation definition.
- Speed up claims processing: Claims on policies held outside super may be processed and paid to you faster if they don’t have to satisfy the same conditions of release as policies held through a super fund.
While superlink has a lot of benefits, there are also some downsides. Not everybody will want to superlink their policy and it can pay to compare different types of life insurance to see what’s best for you.
The main drawbacks of superlinking are:
- Decreases your super: Premiums paid from your super balance could decrease your retirement savings.
- Longer claims process: If you make a claim on insurance funded through your super, it may have to meet several superannuation fund conditions of release before you receive any payout.
If you need to make a claim under a superlinked policy, the insurance held inside your super will typically be assessed first. Any claims not payable through your super will then usually be assessed by the policy that you have outside of super.
This may sound confusing, but it’s because whoever administers your super fund makes the decision on whether to release funds or not. If you’ve ever tried to access your superannuation early, you’ll know that there’s some very stringent release criteria!
In contrast, any life insurance policies held outside your super don’t have the same restrictions.
So if you superlink your policy and your super provider decides your claim doesn’t meet the conditions of release from your super fund, then the total amount may be paid directly to you via your insurance held outside super.
This guide is opinion only and should not be taken as medical or financial advice. Check with a financial professional before making any decisions.
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