Leaving your super fund doesn’t have to mean losing your insurance. Continuation options preserve cover with your old insurer at retail rates, but the Individual Transfer Option under the SMSF Master Insurance Plan usually gives you a better deal. Get wholesale group pricing with your underwriting preserved.
Life insurance inside your super fund is structured as group insurance, with the super fund owning the policy and you covered as a member. When you leave the fund, by switching funds, rolling out to an SMSF, or ceasing your employer-sponsored arrangement, the cover stops. It’s tied to your membership.
So how do you keep yourself protected through the change? That’s what continuation options exist to solve. They give you a way to preserve cover when you leave a fund, without having to go through fresh underwriting at the exact moment you don’t want to.
Two different pathways — and they’re not the same thing
People sometimes use these terms interchangeably, but they mean different things:
- Continuation option — A contractual right within your original group policy to convert your group cover into an individual retail policy with the same insurer. You keep the cover, but at retail prices.
- Individual Transfer Option (takeover terms) — An arrangement under a new insurer’s group policy to accept your original underwriting and issue replacement cover. You keep both the cover and the group pricing.
The distinction matters because the cost is different. A continuation option keeps you with your old insurer but at retail rates. The Individual Transfer Option moves you to a new group policy at wholesale rates. For SMSF members, the second one is usually the better deal.
How continuation options work
If your existing super fund offers a continuation option, you generally have a defined window, typically 60 days from when you leave the fund, to convert your group cover into an individual policy with the same insurer. The cover level is preserved. Your underwriting is preserved. But the policy structure shifts from group to retail, which typically means:
- Higher premiums (retail rates rather than group rates)
- Different product features, since retail policies are structured differently
- No medicals needed within your existing cover level
Continuation options work best when you’re leaving the workforce, don’t have an active super destination, and want to keep cover with a particular insurer. For most people moving into an SMSF, there’s a better option.
Why the Individual Transfer Option is usually better
If you’re setting up an SMSF, you’ve got a destination for your cover — the SMSF Master Insurance Plan, which is the group product available through SMSF Insurance. That means you can use the Individual Transfer Option to bring your cover across to AIA Australia at group pricing, rather than converting to retail with your original insurer.
The difference can be substantial:
- Under a continuation option, you keep cover with your old insurer at retail rates — usually noticeably higher than group rates
- Under the Individual Transfer Option, you move to the SMSF Master Insurance Plan at wholesale rates while keeping your original underwriting
Same underwriting protection. Different pricing structure. Most SMSF members come out ahead with the transfer option, which is one of the reasons they end up using SMSF Insurance to consolidate rather than just exercising a continuation option with their old insurer.
When continuation options are still the right call
Continuation options aren’t pointless — they’re a different tool for a different situation. They make sense when:
- You’re leaving the workforce — And don’t have a new super destination where group cover can be arranged.
- You really want to stay with your original insurer — Perhaps because of specific product features or your existing claims history.
- Your original policy includes benefits — That aren’t replicated under the available alternatives.
- You need cover continuity right now — And don’t have time to set up an SMSF and apply for new group cover.
Mind the clock
Continuation options come with strict time limits. The 60-day window is common, though some policies allow 30, 45, or 90 days. Miss the window and the option lapses. After that. any new cover with that insurer would require fresh underwriting from scratch.
The Individual Transfer Option has its own conditions: you need to be aged under 60, gainfully employed and capable of at least 30 hours per week, and able to provide a recent statement of your existing cover. Both options need to be applied for while your existing cover is still in force.
The strategic question for SMSF members
If you’re setting up an SMSF and you’ve got existing cover, here’s the question worth asking: would you rather convert to retail with your old insurer through a continuation option, or move to wholesale group pricing through the SMSF Master Insurance Plan via the Individual Transfer Option?
For most people, the answer is straightforward — and it’s worth getting both quotes to see the difference for your specific situation. The conversation about insurance is one trustees have to have anyway under SIS Regulation 4.09, so comparing the options and documenting the reasoning is part of fulfilling that obligation.
| Compare your options
Don’t lose your cover when you leave your super fund. Get a quote through SMSF Insurance to see what the Individual Transfer Option can do for you. We can help you get a better deal than converting your existing cover to retail. |
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