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Life insurance through superannuation

When you get super in Australia, you automatically start paying life insurance – but it might not be good value.

Life Insurance

Life insurance is automatically added to your super if you're over 25 and have $6,000 or more in your account. The payments automatically come out of your super unless you opt out by going online to cancel.

There are benefits and disadvantages of having life insurance through superannuation, but for most people, the life insurance you have inside your super is very easy to forget about. Here's a brief guide to the pros and cons, so you can work out whether it makes sense for you.

How does life insurance through super work?

Life insurance within superannuation can help with a payout for your family if you die, get severely ill or become permanently disabled and can no longer work. Insurance premiums are paid out of the money in your super account, meaning you don't have to pay from your take-home earnings.

Death cover

Death cover

Pays a lump sum if you pass away during the policy's term. It may also pay out if you're diagnosed with an incurable illness.

Total and permanent disability

Total and permanent disability (TPD) insurance

Gives a lump-sum payment if you suffer a permanent injury or illness and are no longer fit to work. You'll usually have to be off work for a minimum of 3 or 6 months before your claim can be processed.

Income protection

Income protection

Pays a monthly benefit of up to 75% of your income if you're sick or have an accident and can no longer work. This type of cover isn't typically automatically included with your super.

Is it better to get life insurance through super? Pros and cons

Pros

  • Premiums can be cheaper than policies bought directly
  • Convenience – payments come out of your super
  • Fewer health checks (most often, you don't need any)
  • Less paperwork, admin or renewals for you to manage
  • Tax perks may apply

Cons

  • Reduces your retirement balance because the money is spent on insurance policies
  • Cover might not be as good as you'll get with a direct policy, with less flexibility
  • If you change funds, your cover may end
  • Your nominated beneficiary might not be guaranteed
  • Payouts can be delayed

Finder survey: Do Australians know how much life insurance cover their super includes?

Response
Yes56.7%
No43.3%
Source: Finder survey by Pure Profile of 1110 Australians, December 2023

6 key differences between direct life insurance and superannuation insurance

Direct life insuranceSuperannuation insurance
Buying the policyBuy from an insurer or via a broker, and receive annual renewalsAutomatically paid through your super account - set and forget
Application processApply online or over the phone. You may need to do a medical exam as part of the underwriting processGuaranteed acceptance on shared terms that others get through group life cover. Often no medical exam needed
Payouts and policy limitsYou have flexibility to choose and pay for the level of cover you want, including higher benefitsYou can choose how many units of cover you want, but your overall cover amount may be low compared to options in a policy bought outside super
Payment of premiumsPayments come out of your bank account, and sign-up offers and discounts may be available. Life insurance is not tax-deductible, but income protection isPayments are taken directly from your super contributions, and funds can get beneficial tax relief on premiums
Amending or canceling a policyContact the life insurer directly and follow steps to cancel or make changesEdit or cancel your cover in your super account online or in-app
Choosing beneficiaries?You nominate your beneficiaries with the insurer when you take out a policyYou nominate your beneficiaries with the super fund when you take out a policy, and go through your super fund to add or edit your preferred beneficiary

Am I eligible for insurance in super?

To get insurance via your super, you must:

  • Be at least 25 years old
  • Have at least $6,000 in your super account
  • Have made a contribution into your account within the last 16 months

Insurance is typically added automatically once you meet these eligibility requirements, though you can choose to opt out of insurance cover or change your cover by contacting your super fund.

It's not always good value. For example, most policies expire when you turn 65 and will class you as a blue collar worker unless you tell them otherwise. But if you have a mortgage or a family and you want to provide for them in the event something happens, taking out life insurance through super can be more affordable on your cash flow, as you don't need to pay for it with your regular wage income.

Sarah Megginson's headshot
I've had super life insurance for a decade

"I've had life insurance and income protection through my super for 10 years. It suits me because I don't have to budget for it out of my normal family budget – it costs about $100 a month, and it's deducted automatically from my super balance. This will impact my long-term retirement funds, but hopefully my other investments make up for it!"

Head of editorial

Advantages of life insurance through superannuation

  • It's usually cheaper. A super fund usually buys life insurance in bulk for large groups of people, which means that premiums are often discounted. This form of pricing means you can usually expect to pay less for cover held inside superannuation.
  • It's convenient. This type of cover offers guaranteed acceptance, and premiums are taken directly from your super balance. Not having a standalone policy can cut down on life admin, as you'll have less paperwork than someone who holds a super account and a separate life insurance policy.
  • Fewer health checks. Because the insurance is usually taken out as a group policy through the super fund, individual medical checks aren't usually required. This can be helpful if you work in a high-risk job or have any health conditions as you might have difficulty getting cover elsewhere.
  • You can increase your cover. If you want to get more than the standard amount of life insurance cover that your super fund provides then you can generally apply for more cover. However, you will most likely have to undergo a medical exam or questionnaire and your premiums will increase.

Disadvantages of life insurance through superannuation

  • Reduces your retirement balance. If there's money regularly coming out of your super, it's less money available for your super fund to invest. This can eat into your retirement savings. Funds have returned as much as 22% in the most recent financial year.
  • Cover can be limited. Guaranteed acceptance means you will be given an automatic level of cover, rather than one that's specific to your circumstances. The standard benefit amount is usually between $100,000 and $200,000. That may seem like a lot, but it's generally recommended that your life insurance is around 5 to 10 times your annual salary.
  • Less flexibility. You won't have the freedom to choose a policy that's tailored to your life's needs. For example, life insurance gives you the choice to pay stepped premiums or level premiums. What's more, cover through super usually ends when you reach a certain age (typically 65 or 70).
  • If you change funds, your cover might end. It's common for us to change jobs these days, and with that we often change super funds. But if you do this, there's a chance your cover will cease. That's because super funds must cancel insurance on inactive accounts after 16 continuous months.
  • The payout might be delayed. With life insurance through super, your superannuation fund receives the payout before your beneficiaries do. The superannuation trustee then has to decide whether the condition of release has been met and decide who the correct beneficiary is (if you have failed to nominate one) which can take some time.

Important note about TPD insurance held in super

According to the Australian Securities and Investments Commission figures, around 9 million Australians hold TPD cover and 86% do so through their superannuation fund. But many won't be aware that super funds can only offer "Any Occupation" TPD insurance.

To make a successful claim with Any Occupation cover, you'll need to be disabled to the point that you can't work in any role suited to your education or work experience. "Own Occupation" cover can be claimed if you're unable to work again in the job you did before your disability.

💡Quick tip: If you hold insurance within your super, ask the fund for a list of excluded occupations.

Brenton Tong's headshot
Expert insight: Is it enough cover?

"If you want full coverage for a broader range of events, you need to take out a fully underwritten TPD policy."

Financial adviser and group CEO, Financial Spectrum

How to check if you have insurance through super

To find out if you have life insurance inside your super, you can:

  • Call your super fund and enquire with them directly
  • Log in to your super account online or via the fund's app
  • Check your super fund's annual statement or product disclosure statement (PDS)

This should give you access to the type of insurance you have, as well as how much cover you have and how much you're paying for it.

Common questions about superannuation and life insurance

James Martin's headshot
Written by

Editor

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 219 Finder guides across topics including:
  • Car, home, life, health, travel and pet insurance
  • Managing the cost of living
  • Money-saving tips
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Editor, Insurance

Gary Ross Hunter was an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 6 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald, The Guardian and news.com.au. Gary holds a Kaplan Tier 2 General Advice General Insurance certification which meets the requirements of ASIC Regulatory Guide 146 (RG146). See full bio

Gary Ross's expertise
Gary Ross has written 654 Finder guides across topics including:
  • Health, home, life, car, pet and travel insurance
  • Managing the cost of living

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