Can you have multiple life insurance policies?

Can you have multiple life insurance policies?

If you have multiple super accounts, you may already have multiple life insurance policies. According to the Australian Taxation Office (ATO), about four million people hold two or more super accounts. Most super funds provide automatic or default life cover, according to the Federal Government’s Moneysmart website. However, rules introduced in 2020 mean that depending on your age and monetary balance of your super, you may not be automatically covered by life insurance.

You may also decide to take out an additional life insurance policy to fill any gaps in your existing cover. If you already have life insurance inside of super, for example, you may wish to also take out a separate policy like trauma insurance (super funds can no longer offer trauma insurance policies). The amount of life cover you can get through super by default may be lower than the amount you can get outside of super, so you may want to apply for additional cover. Bear in mind that most super funds will allow you to apply to increase your cover.

Before applying for an additional life insurance policy, check with your current insurer to see whether this impacts your existing policy. Some insurers may apply the maximum cover amount to both policies if you take out two life insurance policies. This may result in your insurer needing to reduce your cover so that you don’t exceed the maximum limit. If this happens, your insurer will typically apply this to the most recently issued policy and refund the premiums you paid on the amount that exceeded the limit.

If you are considering a supplementary policy outside of your super and want to compare some of your options, Canstar’s life insurance comparison selector allows you to compare a range of policies.

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What are the benefits to having multiple life insurance policies?

An additional life insurance policy may help cover for any missing gaps in one policy and provide better financial protections for your loved ones.

A policy through your super is often a lower level of cover than you can get outside of super, according to Moneysmart and the Australian Securities & Investments Commission (ASIC). Life insurance cover through super can end if your contributions stop or your super becomes inactive, so having another policy outside of super can allow you to have peace of mind.
Here are the main benefits of having multiple life insurance policies:

• Better flexibility and choice over your cover, including the cover amount, level of cover, cover term and type of cover (e.g. total and permanent disability (TPD) insurance).
• More security for you and your loved ones.
• Potential discounts and opportunity to save if you purchase through the same provider.

Be sure to read through your product disclosure statement (PDS) when looking to purchase an insurance policy, Be aware of what the policy can and cannot cover, as well as any exclusions it may have.

Can you claim on more than one life insurance policy?

Provided you meet the terms and conditions of each insurer, you should be able to make a claim on both insurance policies. You may face complications though if the insurance policies through your super are not independent from one another.

Income protection and TPD insurance are usually treated separately, but may impact certain super funds’ insurance payments under certain circumstances. It could be a good idea to read the product disclosure statement (PDS) for each policy or get in touch with your insurers to confirm whether or not you’d be able to claim on more than one policy for the same event.

Considerations for multiple life insurance policies

The Federal Government’s Superannuation Productivity Commission finalised a review of the efficiency and competitiveness of the Australian superannuation system in 2019. It found that about 10 million super accounts (a third of all accounts) were unintended duplicate accounts. These unintended accounts cost members $1.9 billion a year in excess insurance premiums. The Federal Government has since introduced measures aimed at cracking down on this. Super funds must now cancel insurance on accounts that haven’t received contributions for the last 16 months, and super accounts with balances under $6,000. Insurance is only provided on an opt-in basis for new super fund members under 25 years old (unless you work in a dangerous job).

If you have multiple superannuation accounts with life insurance, you may want to think about consolidating your super into one account. This may make it easier to manage your super and save you money on insurance premiums and fees. However, you should weigh up the pros and cons as consolidation won’t be right for everyone. You may also need to apply to increase your cover so you are not underinsured.

If you’re considering taking out an additional life insurance policy, it’s important to think about whether you need more than one policy and to remember that you’ll be paying two sets of premiums. Bear in mind that some life insurance companies may offer you a discount when you apply for a large amount of coverage. If you decide to split your cover into two different policies, however, you probably won’t be eligible for this discount.

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