Taking extended leave from work might seem like a straightforward decision, but it could have unexpected consequences for your superannuation insurance coverage that many Australians remain unaware of.
The 16-month rule you need to know:
Since July 2019, superannuation funds have been required to cancel insurance cover for accounts that remain inactive for 16 consecutive months, unless members specifically elect to maintain their coverage. An account becomes inactive when it hasn’t received any amounts – including employer contributions, personal contributions, or rollovers – for 16 consecutive months. The moment a contribution or rollover is received, the 16-month countdown resets.
When this commonly occurs:
Inactive periods leading to cancelled insurance frequently affect people during significant life events, such as: extended parental leave beyond paid entitlements; career breaks or sabbaticals; periods of unemployment or study; and working overseas without Australian superannuation contributions. Many Australians discover their insurance has been cancelled only when they need to make a claim or receive their annual statement.
The notification process:
Your superannuation fund must send insurance inactivity notices before cancelling coverage. These notices are sent when your account has been inactive for 9, 12, and 15 months – essentially giving you warnings at 7 months, 4 months and 1 month before cancellation. However, these notices are only effective if your fund has your current contact details. If you’ve moved house, changed email addresses, or haven’t updated your details, you might miss these critical communications.
How to protect your coverage:
To maintain insurance during periods of account inactivity, you must provide written notice to your fund electing to keep your coverage. This is often called “opting in”. Once you’ve opted in, the election remains valid until you tell your fund you no longer want insurance. Remember, cover can still end for other reasons, including age limits, insufficient balance to pay premiums, policy terms or trust deed requirements, or if you request cancellation. The opt-in process varies between funds, so check your fund’s specific requirements. Some funds accept online elections, while others require signed paper forms.
Additional restrictions on coverage:
Insurance cannot be offered through your super fund in other circumstances, including for: accounts where the balance has never reached $6,000, unless the member elects to have cover; and accounts where the member is aged under 25, unless the member elects to have cover, or is covered by a dangerous occupation exception.
Regular account monitoring:
The Australian Financial Complaints Authority (AFCA) recommends regularly checking your superannuation statements and maintaining current contact details with your fund. This ensures you receive important notices about your account status and insurance coverage. You can monitor your superannuation through ATO online services, which displays all your accounts. The service flags accounts with insurance coverage, but you should check directly with each fund to confirm whether insurance cover applies and whether it may be at risk of cancellation.
What if coverage is cancelled?
If your insurance has already been cancelled due to inactivity, you may be able to apply for new coverage, though this could involve health assessments and waiting periods. Some funds offer reinstatement options for recently cancelled policies.
Take action now:
Review your superannuation accounts to check whether you have insurance coverage and consider whether you need to opt in to maintain it during any planned career breaks. Contact your superannuation fund to update your contact details. If you’re planning extended leave, discuss your options before your account becomes inactive. Consider speaking with a qualified financial adviser to review your superannuation and insurance arrangements, particularly if you’re planning major life changes that could affect your contribution patterns.