finder.com.au

Superannuation Income Protection

Is superannuation income protection the right for choice for you?

Gary Hunter
Gary Hunter

Updated

Fact checked
Compare income protection

We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!

Income protection through superannuation is often cheaper than a normal income protection policy, but there's a reason for that. Lots of policies only cover you for a few years and might not pay you enough to get by.

What is superannuation income protection?

It is common for superannuation funds to offer income protection to their members. Income protection cover through super is similar to stand-alone cover but is often a more affordable option as the policies are sold in bulk. Premiums are also deducted directly from your super balance, making it very convenient as well. Most Superfunds will cover 75% of your income in the event that you are unable to work due to illness or injury.

Is superannuation income protection insurance enough?

Income protection from your superannuation is an easy and affordable way to protect your income if you're unable to work due to illness or injury. However, it does have its limitations. If the conditions of income protection from your super are too restrictive, you should consider looking at a standalone policy instead.

Use our comparison table to see how standalone income protection stacks up against income protection through super.

Compare direct income protection insurance options

Name Product Maximum Monthly Benefit Maximum % of Income Covered Maximum Benefit Period Multiple Waiting Periods Apply
AAMI Income Protection
AAMI Income Protection
$10,000
75%
5 years
Apply online
AAMI customers save 5% on income protection.
Insuranceline Rate Saver Income Protection
Insuranceline Rate Saver Income Protection
$10,000
85%
5 years
Apply online
Get a $100 bonus gift after 2 months. Plus, and get 12 months cover for the price of 11 if you pay annually. T&Cs apply.
NobleOak Income Protection
Finder Award
NobleOak Income Protection
$25,000
75%
Up to 65
Apply online
First month free for NobleOak Income Protection Insurance. T&Cs apply.
Suncorp Income Protection
Suncorp Income Protection
$10,000
75%
5 years
Apply online
Existing Suncorp customers can get a 5% discount.
loading

Compare up to 4 providers

Enter your details and one of our partner brokers will call you. They will discuss your quote, options and available products.

Sex
Do you smoke?

An adviser can help you find cover from trusted life insurance brands.

  • Get competitive quotes from multiple brands
  • Lower rate of declined claims (according to ASIC)
  • Save time and effort
Lender Logos

Superannuation Income Protection: Pros and cons

Weigh up the pros and cons of income protection through superannuation to see if it's worth it.

Pros

  • Premiums may be cheaper. Because super funds buy income protection policies in bulk, the premiums are less than standalone policies.
  • Automatic acceptance. You will usually be automatically accepted for income protection through your super fund.

Cons

  • You might not be getting the amount of cover you need. You might only be able to get cover for up to two years with some super policies (as opposed to up to the age of 65 with some standalone policies).
  • Less flexibility on your policy. A standalone policy can give you more options, e.g. greater choice of waiting and benefit periods or additional benefits for specific injuries/rehab.
  • Premiums are paid through your super. Premiums are funded from your super fund balance and therefore eat into your future retirement fund.
  • Benefit payments must meet strict criteria. When the time comes to claim, your benefit payments are subject to strict criteria under the Superannuation Industry (Supervision) Act 1993 (SIS Act).

Claiming income protection through super

If you need to lodge an income protection claim through your super, you will generally need to follow these steps:

  1. Contact your insurer to let them know you wish to make a claim.
  2. Fill out a claim form with the details of your illness or injury.
  3. Ask your doctor to complete any relevant forms.
  4. Provide any supporting documentation requested from your super fund, such as proof of ID, medical reports and proof of your pre-disability earnings.
  5. Submit your claim.

Your claim will then be assessed by the insurer. However, keep in mind that to receive a benefit, you must satisfy two criteria:

  • You must meet the definition of disability outlined in your income protection policy.
  • You must meet the super fund's temporary incapacity definition so that your income protection benefits can be released to you by the fund.

How do you get superannuation income protection?

Unlike death cover and TPD (total and permanent disability) insurance, income protection through super isn't always automatically included when you join a super fund. Instead, you may need to apply to have income protection cover included as part of your fund membership.

If you don't have any income protection insurance in place and you'd like to take out cover, this is usually a simple process. In most cases, you can apply for cover online through your super fund's online member portal. If that's not an option, or if you've forgotten your login details, call your super fund directly.

Can you have more than one superannuation income protection policy?

Yes. For instance, it's possible to have more than one income protection policy through your super if you have more than one super account. It's also possible to have an income protection policy from your super fund and a standalone policy.

However, this doesn't mean that you will receive payments from all of them. Most payouts are capped at 75% of your income. This includes benefits from other policies, meaning no matter how many policies you take out, you'll only get up to 75% of your income. So if you have two income protection policies, you're paying double the premiums but will only receive cover for the amount of one policy.

Is superannuation income protection tax-deductible?

Payments for income protection insurance through superannuation are not tax-deductible. If you buy a standalone policy, though, those premiums are tax-deductible.

You generally can't claim a tax deduction for a payment for a policy that compensates you for things such as physical injuries, or for a payment that is deducted from your super contributions. Income protection outside of super is tax-deductible though, because it does not directly compensate physical injury; rather, it is insuring your ability to earn an income.

Is the level of cover provided from your super different?

Yes. In most circumstances, you will find that the level of cover offered by income protection insurance from your super differs from standalone policies in the following ways:

  • Income protection insurance from your superannuation: This will typically provide a more basic level of cover. It pays you the income you were receiving prior to becoming temporarily disabled and nothing else. You could find that this is not enough to meet your financial needs if your situation has changed since your initial cover began.
  • Income protection insurance from an insurance brand: Policies offered by life insurers may include features and options not available through super funded policies. These can include benefits such as cancer cover, specific injury benefits, return-to-work benefits, crisis benefits and needle-stick injury benefits for medical professionals.

Can you remove an income protection policy from your super?

Yes, you can remove your income protection policy from your super at any time. Simply get in touch with your super fund or check your super's online member portal. You'll need to have your login details to gain access to the account. Before you cancel, though, consider whether it's worth keeping:

  • Do you have standalone cover? If you already have income protection outside of your super, there's no need for you to have it through your super as well. It's just eating into your retirement savings and won't necessarily pay out if you already have another policy.
  • Can you afford a standalone policy? If you can't, then it might be worth keeping your income protection policy from your super. It might not pay you as much as 75% of your income if you are forced to temporarily stop working, but it will still provide you with some cover, and hopefully enough to get by on.
  • Review your policy regularly. If you do decide to keep your income protection policy inside your super, review it regularly. Every time you receive a pay rise or your job situation changes, your policy may not cover you completely, so check it regularly to ensure that it is still enough.

Is superannuation income protection the right choice for me?

Deciding whether to get income protection insurance from your superannuation or as a standalone policy will depend on your individual needs and circumstances. Here are some of the factors to consider when weighing up which option is more suitable for you:

  • The impact on your day-to-day cash flow by funding premiums from your bank account
  • The tax-effectiveness of both options for your situation
  • Access to benefit payments
  • Level of cover and range of features

Weighing up all the pros and cons of income protection through super can be complicated. You can make a secure enquiry to receive a quote for cover or find out more by entering your details in the form above.

What other types of insurance are available through your super fund?

Super funds usually offer two other types of life insurance as well as income protection. These are:

More guides on Finder

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site