Life insurance can be great, especially if you have kids. But what if they are 17 and working a casual job? Does it make sense to be paying for life insurance?
The federal government is making changes to “stop superannuation funds forcing young people under 25, or with low balances, to pay for life insurance policies they have not asked for, or need”*, but this bill won’t come into play until July 2019.
In the meantime default super funds will automatically provide life insurance to all members, and charge extra fees for this. Because it’s automatic, many young people are completely unaware that they have insurance cover and are being charged a premium for it.
Worse, if your child has multiple super funds, they may end up with duplicate insurance and fees.
But worst of all... if they have a very low super balance (e.g. because they’re young), the insurance charges can contribute to eroding their account to zero.
*Scott Morrison, 2018 Federal Budget Speech