Most super funds offer insurance through super, including life, TPD, and income protection.
Types of life insurance in super
Most super funds (except self-managed super funds) offer 3 types of insurance to members:
Life cover (also called death cover) pays a lump sum or income stream to your beneficiaries. It pays when you die or you have a terminal illness.
Total and permanent disability (TPD) insurance pays a benefit if you become seriously disabled and you’re unlikely to work again.
Income protection insurance (also called salary continuance cover) pays you a regular income for a set time if you can’t work due to illness or injury. This could be for 2 years, 5 years or up to a certain age.
Most super funds will automatically give you life cover and TPD insurance if you’re aged 25 or over. Some funds also automatically give you income protection insurance. This cover is for a set amount. You can usually get it without medical checks.
TPD cover in super usually ends at age 65. Life cover in super usually ends at age 70. If you buy cover outside super, TPD will still usually end at age 65. But you may be able to keep life cover as long as you keep paying premiums.
When you review your insurance, check what cover you have through your super fund. Then compare it with cover outside super. This can help you choose the right policy.
Insurance on inactive super accounts
By law, super funds cancel insurance on accounts with no contributions for at least 16 months. Some super funds may have their own rules and cancel insurance if your balance is too low.
Your super fund will contact you before your cover ends.
If you want to keep your insurance, tell your super fund or add money to that super account.
You may want to keep your insurance if you:
don’t have insurance through another super fund or insurer
need it, for example, if you have children or dependents, or work in a high-risk job.
Insurance for people under 25 or with low super balances
Insurance through super does not start automatically if you’re a new member under 25, or your balance is under $6,000 unless you:
contact your fund and ask for insurance through super
work in a dangerous job and your fund gives you automatic cover – you can cancel it if you don’t want it.
If you already have insurance through super and your balance falls below $6,000, you usually keep your cover.
Use our life insurance calculator to work out if you need life insurance through your super and how much cover you might need.
Superannuation and insurance can be complex. If you need help call your super fund or speak to us.
Pros and cons of life insurance through super
Pros
Can be cheaper — Premiums may be lower because super funds buy cover in bulk.
Easy to pay — Premiums are deducted from your super balance, not your take-home pay.
May be easier to get — You can often get default cover without medical checks. This can be useful if you work in a high-risk job or have health conditions that can make it difficult to get insurance outside super. Check the product disclosure statement (PDS) for exclusions and pre-existing condition rules.
You may be able to increase cover — But you’ll usually need to answer questions and may need medical checks.
Can be tax-effective for some people — Depending on your circumstances, paying premiums through super may be more tax-effective than paying them from after-tax income. Consider getting advice.
Cons
Default cover may not suit you — It may be lower than what you could get outside super, and eligibility rules can apply.
Cover can end or change — Cover may stop if your account becomes inactive, your balance is too low, you change fund or reach an age limit (TPD cover often ends earlier than life cover).
It reduces your retirement savings — Premiums reduce your super balance, which can matter more when you’re close to retirement because there’s less time for your balance to recover.
Check your insurance before changing super funds or closing an account. If you’re over 60 or have a pre-existing medical condition, you may not be able to get the cover you want.
How to check your insurance through super
To check your insurance through super you can:
call your super fund
log in to your super account online
check your annual statement and the product disclosure statement (PDS).
You’ll usually be able to see:
what type of cover you have (life, TPD and/or income protection)
how much cover you have
how much you’re paying in premiums
when your cover ends, or when it can be cancelled.
Your fund’s website will have a PDS that explains who the insurer is, what’s covered and the claim rules.
If you have more than one super account, you may be paying premiums on more than one insurance policy. This reduces your retirement savings. You may not be able to claim the full benefit from more than one. It depends on the policies. Consider whether you need more than one policy, or whether you can get cover through one fund.
When reviewing your insurance in super, check whether there are any exclusions or whether you’re paying a loading on your premiums. A loading is a percentage increase on the standard premium, charged to higher risk people. For example, if you have a high-risk job, a pre-existing medical condition, or you’re classified as a smoker.
If your super fund has incorrectly classified you, contact them. You could be paying more than you need to.
We can assist if you have any questions regarding insurance and your super.
