Insurance through super
Super - cover me
Many super funds arrange life and disability cover for
their members. Insurance is arranged by the super fund trustee,
acting on behalf of the members of the fund. Having insurance
for accidents and illness can provide a sense of security for you
and your family.
If you're reviewing your life insurance, a good place to start
is to check what cover you get through your super fund so you can
compare with other options.
insurance available through super funds
Super funds typically have three types of
insurance for members:
- Death cover (also known as life
insurance) - Your beneficiaries receive
a benefit if you die
- Total and permanent
disability (TPD) cover - You receive a benefit if you become
seriously disabled and are unlikely to ever work again
protection (IP) cover - You receive an income stream for a
specified period if you can't work due to temporary disability or
Your employer's default fund must offer a minimum level of life
insurance, depending on your age. You may choose to increase,
decrease, or cancel your default insurance cover. Life insurance
benefits are paid as either a lump sum or an income stream.
Your super fund's product disclosure statement (PDS)
usually has details of the insurer and the cover available. You can
also get these details by contacting your super fund. Don't be
afraid to ask as many questions as you need to. You may consider
getting financial advice if you have broader
questions about insurance or other financial products that are
suitable for you.
Like other insurance policies, you will pay insurance premiums. These are deducted from your
super account balance. Many super funds have a default level of
cover that provides a small amount of insurance. However, you can
choose to increase or decrease your level of cover to meet your
Check your life insurance cover before changing super
Before you change super funds, make sure you can
get the same death, TPD or income protection cover that
you currently have, in your new fund. Some funds
will allow you to transfer your current level of cover, ask your
new fund if they will do this before you roll your super
over. Be particularly careful if you have a pre-existing
medical condition or are aged 60 or over. Seek financial
advice if you are unsure.
Why insure through super?
There are benefits in getting life insurance through super:
- It's often cheaper because super funds purchase insurance
policies in bulk
- There may be a tax advantage because the premiums are paid from
your super account, not your after-tax income
- You can get the cover you need for you and your family, even if
money is tight
- It's easy to manage because premiums are automatically
- Some funds automatically accept you for cover without requiring
a health check
Insurance premiums through super still cost money. Consider
topping up your super so your nest egg continues to grow over
However, there are also some drawbacks with life insurance
- Limited cover - The types of insurance, and
level of cover, may be limited.
- Not portable - If you move to a different
super fund or your employer's super contributions stop, your cover
may end without notice.
- Cost of extra super funds - If you have more
than one super fund you may be paying for insurance in each fund,
which may be an unnecessary cost.
- Tax - Tax may be payable on some benefits.
Also, there may be tax implications if your super recipient
is not a dependant, so consider getting financial
- Slower to pay - There can be delays in the
payment of life insurance benefits as these go to the fund first,
who then distribute them to you or your beneficiaries.
- Who gets paid - If you do not make a binding beneficiary nomination, or your
fund does not offer binding nominations, the super trustee will
decide who gets your benefits when you die. Usually benefits are
paid to dependents, after taking your wishes into
- Ends at around age 65 - Life insurance
coverage through super usually ends when you reach a certain age
(usually 65 or 70), whereas policies with other providers can cover
you for longer.
- Reduces super balance - The cost of insurance
premiums comes out of your super balance, so although it could be
cheaper to take out insurance through super, there will be less
money for your retirement.
Case study: Paula gets more life cover
Paula lives with her partner Sam and their daughter Sarah.
Paula is the main income earner while Sam works part time. Paula
has life insurance through her super fund but it is not enough to
cover the mortgage and support her partner to raise their daughter
if she were to become ill or die. While Sam could return to work
full time, his income may still not be enough to support the
Paula decides she needs some additional life insurance
cover, so she compares the type of cover and value of increasing
her insurance through super and getting a separate
The key to deciding if you want insurance
through your super fund is knowing how much cover you need,
understanding whether your super fund will offer the full amount,
and comparing the costs and conditions with other providers. Being
insured through super is often a cost-effective and easy option,
but it is a good idea to shop around. Just remember that if you
change funds your insurance cover may stop.
Last updated: 04 May 2016