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Superannuation life insurance

Is insurance inside super a rip-off?

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Many Australians* don't realise that their super fund usually includes some level of insurance to cover you in events like:

  • Death (pays to your loved ones)
  • Injury and illness
  • Total and permanent disablement

Your included insurance through super is taken out as a "group" policy which enables you to pay a premium that's standard for all members.

While super insurance sounds affordable, there are many limitations which make it less worth it for some policyholders (while there are benefits that make it more worth it for others).

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What are the pros or cons of superannuation life insurance?

While it's convenient to use the policy that's included with super, there may be a standalone policy that's more suitable for your needs. It's worth reviewing the benefits and drawbacks of cover inside super:

ProsInside super: The good

  • It's usually cheaper
  • Reduced medical exam requirements
  • Pre-existing medical conditions may be covered

ConsInside super: The not so good

  • Harder to prove disability
  • The amount of cover may not be what you need
  • Reduces your final super balance

*In a recent study of 1,500 superannuation members, found that 1 in 5 members did not realise their fund included insurance.

How much is my super balance affected by insurance?

A downside of paying for insurance inside super is that your super balance is reduced, but by how much exactly? SelectingSuper published a list of the top 10 performing funds in the last 20 years. We broke down the costs of insurance included with each of these funds to work out how much more you could have over 20 years if you opted-out of insurance.

This calculation is a general indicator of how much more you could earn by opting out of super insurance cover. This analysis was completed in February 2019. Your balance may be impacted by the actual return your super fund achieves that year, how often a super fund accrues interest on your investment and the cost of your actual insurance cover based on your personal situation.

FundInvestment return (pa.)Balance after 20 years (with insurance)Balance after 20 years (if opted out of insurance)Extra balance
AustSafe Super (Sunsuper)7.7%$456,129.76$466,618.67$10,488.91
BUSSQ MySuper7.6%$420,589.53$447,096.84$26,507.31
Cbus Industry Super7.6%$418,831.59$466,618.67$47,787.08

Life insurance inside vs outside super

Here are the key differences between life insurance inside and outside of super:

Inside super

Outside super
Premiums deducted automatically?
  • Yes
  • No (unless you link cover to your super)
Eats into your super balance?
  • Yes
  • No
Benefits are paid out to the person you name on your policy?
  • No, first to your trustee then your beneficiaries after conditions of release
  • Yes
Is automatically renewed?
  • Yes
  • You might need to inform your insurer
Can my life insurance be tailored?
  • Yes (check with the super fund)
  • Yes (check with insurer)
Pre-existing medical conditions automatically covered?
  • Might be automatically covered if bought under default super with an employer
  • Assessed on an individual basis

Should I cancel my super insurance?

Not so fast:

  • Don't rush to cancel cover inside your super fund. If you have a medical condition or a dangerous job, a default super insurance plan might cover you automatically and help out with your claim if you're forced out of work at some point. If you cancel and reapply for cover later on, you most likely won't be covered.


  • Consider your life stages and what you need. For instance, if you are young and have no dependants you won't have much use for death insurance but you may need to consider income protection. Decide what you need covered and how much.
  • Keep cover, modify or cancel. Keep cover if it's suitable for your situation. Choose between super insurance or standalone cover. Cancel if you really have no need for it.
  • Review regularly. Your life insurance needs in five years will be different to what they are now.

Insurance comparisons inside and outside super

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Date of Birth
Coverage is the amount of money that you will be paid in the event of a claim. An insurance consultant can help you determine an appropriate amount. Calculator
Provides a lump sum payment if you become totally and permanently disabled and are unable to return to work.
Provides a lump sum payment if you suffer a serious medical condition. Cover can be taken out for 40-60 medical conditions depending on the policy you choose.
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Name Product Maximum Cover Maximum Entry Age Minimum Sum Insured Expiry Age
NobleOak Life Insurance
Get 2 months free when joining combined cover. Offer ends in April 30, 2020. T&Cs apply.
Real Family Life Cover
No expiry age as long as premiums are paid
Get a refund of 10% of the premiums you've paid (in the first 12 months) with The Real Reward™ .
Zurich Ezicover Life Insurance
Get your first month free. T&Cs apply.
Medibank Life Insurance
No expiry age as long as premiums are paid
10% discount for Medibank health members & go into the draw for $1,000 Gift Card when you get a life insurance quote.
ahm Life Insurance
No expiry age as long as premiums are paid
ahm Health members can save 10% off premiums.
Guardian Life Insurance
No expiry age as long as premiums are paid
ANZ Life Insurance

Compare up to 4 providers

Name Product Insurance included
QSuper Lifetime - Aspire 1
Death, TPD
The Lifetime option is a MySuper product that adjusts your investment mix each 7-10 years as you get older.
QSuper is a member-owned super fund and is one of the largest super funds in Australia.
Sunsuper Lifecycle Balanced
Death, TPD
The Lifecycle Balanced option is a MySuper product that invests your super in a balanced fund until you’re near retirement.
Earn a Retirement Bonus of up to $4,800 when you open a new Income account. T&Cs apply.
Virgin Money Super - Lifestage Tracker
Death, TPD
The Lifestage Tracker is a MySuper product that invests in a range of asset classes in line with your age.
Performance figures and fees are based on the LifestageTracker: Born 1969-1973. Earn Velocity Frequent Flyer Points for making contributions to your super (T&Cs apply).
HESTA - Core Pool
Death, TPD, Income Protection
The Core Pool invests in a mix of asset classes and is an authorised MySuper product.
HESTA is an industry super fund open to all Australians and designed for employees in the health and community services sector.
Future Super Renewables Plus Growth
Death, TPD, Income Protection
Future Super is Australia’s first 100% fossil fuel free super fund and is certified by the Responsible Investments Association Australia.
The Future Super Renewables Plus Growth option has a 20% asset allocation in renewable energy projects while excluding investments in live animal export, tobacco and gambling.
Australian Catholic Super Lifetime - Grow
Death, TPD, Income Protection
The LifetimeOne investment option is a MySuper product that changes your investment mix as you get older.
A Catholic super fund open to all Australians and designed for people working in Catholic education, healthcare or aged care.
Superestate Balanced Essentials
Death, TPD, Income Protection
The Balanced Essentials fund invests in a range of shares, residential property and other assets and has a medium level of risk.
Superestate focuses on investing your super in physical residential properties and charges some of the lowest annual fees in the market.
AustralianSuper - Pre-mixed, Balanced option
Death, TPD, Income Protection
The Balanced option is a pre-mixed, MySuper fund that invests in a diversified range of asset classes.
AustralianSuper is an award-winning industry super fund and is the largest super fund in Australia.
LGIAsuper MySuper Lifecycle - Under 75
Death, TPD, Income Protection
The LGIA MySuper Lifecycle option aims for higher returns while you’re under 75.
LGIA is a medium-sized, member-owned super fund open to all Australians.
First State MySuper Life Cycle Growth
Death, TPD, Income Protection
This MySuper product will invest your super in a pre-mixed Growth fund until you’re 60, then it’ll switch to Balanced.
First State Super is a not-for-profit super fund with more than 750,000 members around Australia.
BT Super for Life - MySuper Lifestage Fund
Death, TPD
The MySuper Lifestage fund invests your super in a mix of asset classes depending on how old you are.
Westpac Group customers can manage their super alongside their day-to-day bank accounts.
Cbus Growth
Death, TPD, Income Protection
The Growth fund is a pre-mixed investment portfolio and an approved MySuper product.
Cbus is a leading industry super fund for the building and construction industry, that’s open to all Australians.
BUSSQ MySuper Balanced Growth
Death, TPD
The MySuper Balanced Growth option is a ready-made, diversified fund with a medium level of risk.
BUSSQ is an industry fund designed for the building and construction industry and open for all Australians.
Suncorp Lifestage Fund
Death, TPD
The Lifestage Fund readjusts your investment mix every few years to reduce your level of risk as you get older.
A retail super fund that offers access to personalised financial planning and advice.
HostPlus Balanced
Death, TPD, Salary Continuance
The Balanced fund invests your super in a range of assets and is designed for high long-term growth.
An industry super fund open to all Australians with a focus on the hospitality and retail sector.
MTAA My AutoSuper (Balanced)
Death, TPD
The Balanced option is a MySuper product that invests in a range of asset classes aiming for medium to high long-term returns.
MTAA is a national super fund available to all Australians with a focus on the motor trades and automotive sector.
REST Super - Core Strategy
Death, TPD, Income Protection
The Core Strategy is a diversified investment portfolio that balances risk and return, and is an authorised MySuper product.
REST is an industry super fund tailored towards the retail sector and open to all Australians with almost two million members.
UniSuper Balanced
Death, TPD, Income Protection
The Balanced option is a MySuper product that invests in a mix of growth and defensive assets.
A flexible industry super fund for people who work in Australia’s higher education and research sector.

Compare up to 4 providers

The information in the table is based on data provided by Chant West Pty Ltd (AFSL 255320) which is itself supplied by third parties. While such information is believed to be accurate, Chant West does not accept responsibility for any inaccuracy in such information. Chant West’s Financial Services Guide is available at . Finder offers no guarantees or warranties about the data and we recommend that users make their own enquiries before relying on this information. Performance, fees and insurance data is based on each fund's default MySuper product. Where the performance, fees and insurance data for the MySuper fund vary according to the member's age, results for individuals between 40-49 years of age have been shown. Past performance is not a reliable indicator of future performance.

*Past performance data is for the period ending December 2019.

What's the best superannuation life insurance policy on the market?

The Australian Financial Review's annual Blue Ribbon Awards identified the best life insurance policies inside superannuation. Some of the main criteria assessed included lump sum amounts, wide range of features and long expiry age.

The best term and TPD life insurance of 2016

PolicyAwardProduct details
MLC Life Cover with TPD RiderBest policyWide range of features including accidental injury and guaranteed future insurability. Expiry age of 100 with clear pricing for all ages and occupations
TAL Accelerated ProtectionHighly commendableOption to buy back your life insurance cover in the event of a TPD claim and premium freeze benefits
AIA Priority ProtectionHighly commendableUnlimited cover for certain occupational categories and a funeral advancement amount up to $25,000

We also recommend reading these guides

In-depth guide to superannuation cover

How does superannuation insurance work?

Here's a run-down of how it works.

What's it for?

Insurance gives you peace of mind as it provides financial support if you die or need to stop work due to injury or illness.

How do you pay?

Cover is usually automatically included when you join a super fund and fees are deducted from your super.

What if I stop contributing to super?

If you or your employer stop making contributions, insurance fees will still be deducted from your super balance.

Can I cancel or change my insurance?

Yes you can. Just get in touch with your super fund or check your super's online platform.

The four types of insurance available in super

Terminal illness


Total and permanent disability

Income protection

Pays if...Pays if you're likely to die within 24 monthsPays to your family, dependants or estate if you diePays if you're unlikely to ever work again due to illness or injuryReplaces part of your income for a short period if you're unable to work (temporarily) due to illness or injury
Automatic coverYesYesYesYes
Cover usually ends at age75756565
Pre-existing medical conditions: Are they covered?YesYesYes Yes
Does your employment status at the date of an injury affect your cover?NoNoYesYes
Are you covered if a claim has been paid in the past under the same type of cover?NoNot availableNoYes
Is there a waiting period before claims can be made?NoNoYesYes

*Active employment. This means your ability to perform the duties of your normal job in a full-time capacity when your cover starts.

Can I choose where a death benefit goes?

  • Yes, but you will need to choose beneficiary that is a "binding" nomination.

The cost of cover or amount of cover can change as you get older

The cost of life insurance inside a retail superannuation fund will often change based on your age. The older you are the more expensive it gets. The cost is also affected by the way you pay for cover.

Unit-based vs fixed

You can often choose between two types of payments: unit-based cover or fixed cover.

  • Unit-based cover: The cost stays the same but your cover decreases as you get older.
  • Fixed cover: Your cover stays the same, but your costs increase with age.

Note: Superannuation life insurance will typically start off as unit-based cover, which you can then switch to fixed cover if needed.

What types of superannuation funds offer life insurance?

1. Self-managed super funds

A self-managed super fund (SMSF) is a super fund where investments and life insurance choices are managed by a small group of trustees including yourself. Some key characteristics include:

  • Greater control of investments
  • Higher account-keeping costs

2. Managed super funds

This is where your investments are managed by a large fund and life insurance policies are managed by a trustee in a super fund. Managed super funds that include life insurance can typically be:

  • A retail super fund
  • An industry super fund
  • Set up by your life insurer

How is life insurance through super taxed?

Life insurance inside super is different to cover outside of super when it comes to tax. Tax rules will also differ according to the specific type of life insurance.

Life insuranceIncome protectionTPD
Inside superPremiumsTax-deductibleTax-deductibleTax-deductible
BenefitsTax-free for dependant beneficiariesTaxedTaxed
Outside superPremiumsNot tax-deductibleNot tax-deductibleNot tax-deductible
BenefitsTax-free (no matter who is the beneficiary)Tax-freeTax-free

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How is life cover through a self-managed super fund (SMSF) different?

Life insurance through an SMSF has increased in popularity over recent years whereby the SMSF trustee becomes the owner of the policy and is responsible for making the premium payments. In the event of a claim, the benefit is not paid to the policyholder but to the fund. The trustee will distribute the benefit payment to the policy beneficiaries.

Here's how life cover through an SMSF works

Self Managed Super Fund Diagram
Pros and cons of SMSF insuranceBack to top

10 useful tips for life insurance and superannuation

  1. Take advantage of cost-effective insurance cover: When you choose to buy life insurance through superannuation, you should get the benefit that comes with group buying. Since your super fund is likely to be purchasing life insurance policies on behalf of a large group of people, insurance companies should offer competitive rates for the same, which help to make the cover more cost-effective for you.
  2. Life insurance for self-managed super funds: If you are in charge of an SMSF, you need to ensure that buying life insurance through superannuation is a decision that is beneficial for every member of your fund, according to their specific situations. If the decision does not tie in with the investment strategy of the fund, you may have to rethink the decision.
  3. Put in place a binding nomination: A binding nomination ensures that your death benefit is paid to the trustee of your choice. If you do not nominate someone, the trustee will decide who the benefit is paid to.
  4. Tax liability for non-dependant beneficiaries: If the beneficiaries of your life insurance proceeds through super are people other than your spouse, your kids or financially dependent persons, they will have to pay tax on the money that they receive through your super fund. This is not so when life insurance is purchased outside super.
  5. Minimum levels of life insurance cover: Even if you have decided not to choose your own super fund, you should be aware that it is mandatory for your employer to contribute into a super fund and that the fund should provide you with a minimum level of life insurance cover. This can benefit those who do not have any other type of life insurance cover.
  6. Added cover for disability: Most super funds offer additional cover for disability when you choose to purchase life insurance through superannuation. If your super fund also works along the same principles, you can benefit from the added cover if you become disabled and cannot continue to work for a while.
  7. Automatic acceptance for life insurance cover: Most super funds offer their members an automatic acceptance for a specific level of life insurance cover. This means you do not have to prove your eligibility for the cover, nor do you have to undergo medical examinations for the same. This can be especially useful for people who have a difficult time getting insurance outside of super.
  8. No automatic acceptance for your own super fund: You can take advantage of automatic acceptance by opting to pay for life insurance through superannuation. However, you need to be aware that if you are choosing your own super fund, you may not be eligible for this benefit. This benefit is usually available to those people who opt to become part of a super fund that their employer has a special arrangement with.
  9. Added cover for income protection: Another advantage of purchasing life insurance through superannuation is that you can choose income protection as an ancillary cover within your core life insurance policy. This helps you to protect yourself and your loved ones from a loss of income arising from serious illnesses and disabilities.
  10. Fulfilling the conditions of release: This is a vital consideration if you are thinking of buying life insurance through superannuation. You should know that every super fund has certain conditions of release for benefit payouts. Only if those conditions of release are satisfied will your beneficiaries be eligible to receive any money from your super account. Therefore, if there is any ambiguity or doubt in your mind whether a certain circumstance will fulfil the conditions of release or not, you may want to consider buying life insurance outside superannuation.
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Some final questions you might have

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Flexible linking: Combine your life cover inside super with policies outside of superannuation

You can now link your existing life insurance in super with policies outside super, such as income protection, TPD and trauma cover, with a new feature called flexible linking. This feature enables policyholders greater flexibility in managing their life insurance policies inside and outside of super, without sacrificing the quality of cover that they require. Currently, flexible linking is only available through select providers.

Flexible policy options

There are a few options to make your policy more flexible.

  • Bundling. One option is a combined policy where you can link multiple coverages, such as life and critical illness insurance, into one policy.
  • Flexible policy linking. Another option is policy linking. Policy linking allows you to split your policy ownership between your super fund and individual ownership.

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*The products compared on this page are chosen from a range of offers available to us and are not representative of all the products available in the market. There is no perfect order or perfect ranking system for the products we list on our Site, so we provide you with the functionality to self-select, re-order and compare products. The initial display order is influenced by a range of factors including conversion rates, product costs and commercial arrangements, so please don't interpret the listing order as an endorsement or recommendation from us. We're happy to provide you with the tools you need to make better decisions, but we'd like you to make your own decisions and compare and assess products based on your own preferences, circumstances and needs.

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4 Responses

  1. Default Gravatar
    ASAJILEMarch 31, 2017

    When should an insurance be unnecessary in superfund?

    • Avatarfinder Customer Care
      ZubairApril 3, 2017Staff

      Hi ASAJILE,

      Thank you for your question. is a comparison and information service and we are not permitted to provide our users with personalised financial advice or product recommendations. You should contact your super fund directly for clarification on this matter.

      All the best,

  2. Default Gravatar
    AllanNovember 7, 2016

    If you have two superannuation policies, one personal and the other where a % of your wage from your employer puts into , and both have a life insurance cover, can you stop one insurance cover and use the premium amount to bolster your super contribution’s.

    • Avatarfinder Customer Care
      MauriceNovember 8, 2016Staff

      Hi Allan,

      Great question. In some cases, you can consolidate the cover of two policies together. However this will depend on the specific conditions of the two policies.

      It’s a good idea to get in touch directly with your insurer or a financial adviser.

      I hope this helps,


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