As we discussed in our last blog, the government has permitted early access of superannuation for those experiencing financial hardship of up to $10,000 each financial year as part of their COVID-19 measures.
Perhaps you are on the fence, still not sure whether you should take out a portion of your super funds out to pay for your expenses during the financial uncertain period we are in.
We would like to give you the full picture in terms of how taking out a significant portion of your super funds could impact your life insurance.
You may be wondering what does taking out your super have to do with your life insurance?
For those who have recently entered the workforce and therefore do not have a large super balance, taking out a sum of $10,000 could reduce their fund balance to zero. Once this happens, their life insurance, TPD cover and death benefits will also cease. This could leave many people in a difficult situation especially given the pandemic situation the world is in.
What is even more significant to note is that since the changes to superannuation that occurred on 1st April 2020, any individual who loses their Life Insurance Cover due to low super balance will not automatically be able to reinstate their cover simply by calling their insurer. In order to reinstate their Life Insurance, their account balance would need to reach a minimum of $6000.
While for some people with large super funds, perhaps a small withdrawal would not have such disastrous effects, for those with limited super balances, we would urge you to exhaust all other means of accessing financial welfare prior to early access of super.
Whether you choose to access your super fund is obviously dependant on your individual circumstance. However, our job is to keep you informed during this uncertain time.
If you have any more questions about Super funds or Life Insurance, you can speak to the lawyers at Shaheen Legal on (02) 9854 5552
If you want to find out about eligibility for Early Access to Super, you can read last week’s blog on Eligibility for Early Access to Super During Covid-19.
