Check if you already hold insurance in your super by contacting your fund.
Superannuation income protection insurance: The basics
Many superannuation funds offer income protection to their members. This insurance offers peace of mind and usually pays 70%-85% of your income if you get sick or injured and need to take some time off work.
Millions of Australians are likely to pay for life insurance, such as income protection, and not even know it.
Having multiple super fund accounts means that you could be losing a substantial portion of your balance to account management fees and insurance.
With the ATO stating the total value of lost and unclaimed super is $13.8 billion across the country (as of 30 June 2020), a great starting point is to look into any super accounts you hold. You should be able to see any insurances you're paying for via your online account or app. Or, you can give your super fund a call and ask them directly.
On the other hand, not everyone will have insurance in their super automatically. If you meet these eligibility requirements, you can expect to have some cover (unless you've otherwise opted out):
You're at least 25 years old
You have more than $6,000 in your super
You've made a contribution into your account within the last 16 months
Income protection within super: Key pros and cons explained
Pros
Cheaper premiums. Super funds are able to drive down insurance costs and pass these on to consumers by buying policies in bulk.
Easier to manage. Having your income cover, life insurance and TPD grouped together is another plus. You'll have less paperwork than buying each of these insurance types from one or more different providers if you were to go direct.
Tailor insurance to your needs. Increasingly, super funds are offering customers the chance to tailor their income protection insurance to their needs.
Cons
Less certainty when making a claim. Policies are sold under group terms to all members. This can lead you to having a greater chance of a claim being turned down. Whereas with direct insurance, a policy is set up after an insurer commits to you based on your individual circumstances.
Benefits are less comprehensive. In general, cover within super may have less flexibility on waiting periods, how long you can be paid for or extra perks such as rehabilitation for certain injuries.
Premiums will eat away at your super balance. Money that otherwise would have been invested in your super is spent on your insurance premiums. This can really add up over the years. On the other hand, premiums can be comparatively small within super.
Income protection insurance within super: Compare 9 providers
Here's a quick rundown of the maximum cover limits of some leading providers in Australia:
Provider
Maximum monthly cover
Bendigo Bank
Up to $20,000 a month or 85% of your salary (whichever is lower)
Zurich
$30,000
Suncorp
$25,000
AustralianSuper
Up to $30,000 a month or 85% of your salary (whichever is lower)
BT
The greater of the income ratio and 75% of monthly earnings
ClearView
$30,000
MLC
$60,000
TAL
$12,000
Westpac
The greater of the income ratio and 75% of monthly earnings
What options do I have for direct policies?
Brenton Tong, financial expert and group CEO of Financial Spectrum
For Brenton Tong, it's worth looking into fully-underwritten income protection to help ensure you've enough insurance for your needs.
Tong commented: "Once you start looking into it in detail, a fully underwritten policy you've selected through thorough research is likely to give you much better value for money."
With that in mind, Finder has identified 3 brands that will currently offer $500,000 of income protection cover for under $100 per month.
These were NobleOak ($63.56), Bendigo ($83.55) and Medibank ($84.15) respectively. What you'll actually pay will vary depending on your personal circumstances.
Compare more direct income protection policies in Australia
Key features to look out for when comparing income protection insurance
Monthly benefit
This is the highest possible benefit you'll get while off work and on a claim for your insurance.
% of income covered
Some insurers will cover up to 70% of your income. Some providers, such as Aspect, go as high as 85%.
Maximum benefit period
This is the maximum length of time you'll be able to claim benefits while you recover. It varies from 2 years, 5 years and up to the age of 65.
Expiry age
This is the age at which you will no longer be able to renew your policy. For most insurers, this is when you reach 65 years of age.
Indemnity value
You'll need to prove your recent earnings, often for the last 12 months. Under indemnity value policies, the amount you're insured is a percentage of your salary at the time of making a claim.
Agreed value
Policies where you could "lock in" the amount you wanted to receive each month during your application are no longer available for new applicants of income protection.
Any occupation
This type of policy will cover you only if you can't return to the workforce in any job that's suited to your education and training.
Own occupation
This type of policy pays out if you're unable to work in your usual occupation or profession (i.e. the job you have currently been working in).
James Martin was the insurance editor at Finder. He has written on a range of insurance and finance topics for over 7 years. James often shares his insurance expertise as a media spokesperson and has appeared on Prime 7 News, WIN News, Insurance News, 7NEWS and The Guardian. He holds a Tier 1 General Insurance (General Advice) certification and a Tier 1 Generic Knowledge certification, both of which meet the requirements of ASIC Regulatory Guide 146 (RG146). See full bio
James's expertise
James has written 255 Finder guides across topics including:
One of the benefits of income protection insurance is that you may have the ability to claim a tax deduction on your premium benefits. Find out if the same rules apply for policies inside super.
Find out what an AIA income protection insurance policy covers and receive a secure quote for cover. AIA income protection can cover up to 75% of your income following serious injury or illness.
Looking for the best income protection insurance but not exactly sure where to start? Compare the Finder Awards 2023 insurance winners.
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