Most super funds offer life, total and permanent disability (TPD) and income protection insurance for their members.
When reviewing your insurance, check if you’re covered through your super fund. Compare it with what’s available outside super to find the right policy for you.
Types of life insurance in super
Super funds typically offer three types of life insurance for their members:
- life cover — also called death cover. This pays a lump sum or income stream to your beneficiaries when you die or if you have a terminal illness
- TPD insurance — pays you a benefit if you become seriously disabled and are unlikely to work again.
- income protection insurance — also called salary continuance cover. This pays you a regular income for a specified period (this could be for 2 years, 5 years or up to a certain age) if you can’t work due to temporary disability or illness.
Most super funds will automatically provide you with life cover and TPD insurance. Some will also automatically provide income protection insurance. This insurance is for a specified amount and is generally available without medical checks.
TPD insurance cover in super usually ends at age 65. Life cover usually ends at age 70. Outside of super, cover generally continues as long as you pay the premiums.
Under the law, super funds will cancel insurance on inactive super accounts that haven’t received contributions for at least 16 months. In addition, super funds may have their own rules that require the cancellation of insurance on super accounts where balances are too low.
Your super fund will contact you if your insurance is about to end.
If you want to keep your insurance, you’ll need to tell your super fund or contribute to that super account.
You may want to keep your insurance if you:
- don’t have insurance through another super fund or insurer
- have a particular need for it, for example, you have children or dependents, or work in a high-risk job
Insurance for people under 25 or with low super balances
Insurance will not be provided if you’re a new super fund member aged under 25, or your account balance is under $6000 unless you:
- contact your fund to request insurance through your super
- work in a dangerous job and your fund chooses to give you automatic cover – you can cancel this cover if you don’t want it.
If you already have insurance and your balance falls below $6000, you usually won’t lose your insurance as a result.
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 a financial adviser.
Pros and cons of life insurance through super
- Cheaper premiums — Premiums are often cheaper as the super fund buys insurance policies in bulk.
- Easy to pay — insurance premiums are automatically deducted from your super balance.
- Fewer health checks — Most super funds will accept you for a default level of cover without health 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) to see the exclusions and treatment of pre-existing conditions.
- Increased cover — You can usually increase the amount of cover you have above the default level. But you’ll generally have to answer questions about your medical history and do a medical check.
- Tax-effective payments — Your employer’s super contributions and salary sacrifice contributions are taxed at 15%. This is lower than the marginal tax rate for most people. This can make paying for insurance through super tax-effective.
- Limited cover — The amount of cover you can get in super is often lower than the cover you can get outside super. Default insurance through super isn’t specific to your circumstance and some eligibility requirements may apply.
- Cover can end — If you change super funds, your contributions stop or your super account becomes inactive, your cover may end. You could end up with no insurance.
- Reduces your super balance — Insurance premiums are deducted from your super balance. This reduces your savings for retirement.
Check your insurance before changing super funds. If you have a pre-existing medical condition or are over age 60, you may not be able to get the cover you want.
How to check your insurance through super
To find out what insurance you have in your super you can:
- call your super fund
- access your super account online
- check your super fund’s annual statement and the PDS
You’ll be able to see:
- what type of insurance you have
- how much cover you have
- how much you’re paying in premiums for the cover
Your super fund’s website will have a PDS that explains who the insurer is, details of the cover available and conditions to make a claim.
If you have more than one super account, you may be paying premiums on multiple insurance policies. This will reduce your retirement savings and you may not be able to claim on multiple policies. Consider whether you need more than one policy or whether you can get enough insurance through one super fund.
Before buying, renewing or switching insurance, check if the policy will cover you for claims associated with COVID-19.
When reviewing your insurance in super, see if there are any exclusions or if 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 to let them know. You could be paying more for your insurance than you need to.