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Overpayment of Life Insurance: The Unseen Burden on White-Collar Australians
Life insurance that is bundled with superannuation has been a financial burden for many Australians who unknowingly pay higher premiums due to automatic classification as blue-collar workers. Super funds typically provide life insurance for all members over 25 with a balance exceeding $6,000. These members have premiums deducted from their super balance unless they choose to opt out. Given that over 60% of Australians are white-collar workers, according to the latest census, this means a significant proportion of the population may be paying more than required for insurance that is based on the higher risk associated with blue-collar jobs.
Insurance Premiums Based on Occupation Risk
Insurance premiums are determined by risk, and most super funds default to insuring the highest risk and consequently most expensive group: blue-collar workers. This assumption increases the premiums for a majority of Australians who are not in blue-collar jobs. The inherent discrepancy here is that more than half of Australians are essentially paying for risks associated with an occupation that they do not have.
Updating Occupation Category: A Simple Solution
Resolving this issue is straightforward. Members can update their occupation category to white-collar on their super fund’s website, potentially leading to a significant reduction in premiums and an increase in death benefits. A few employees at Finder, for instance, managed to drastically lower their monthly fees or double their death benefit simply by making this change – a process that can take less than a minute.
Financial Impact: Lower Premiums, Higher Death Benefits
By making this quick update, many Australians can save on their superannuation costs. Switching from a blue-collar to a white-collar category can lead to substantially lower premiums and higher death benefits, offering financial security without the need for additional expenditure. Therefore, it is crucial for Australians to review their superannuation and ensure that their listed occupation accurately reflects their job, ultimately saving them money in the long run.
