Benefits of superannuation life insurance

Why take out life insurance through superannuation?

The Investment and Financial Services Association or IFSA has estimated that 70% of life insurance policies are purchased through superannuation funds. This figure was based on the number of people covered under group insurance policies by employers and industry superannuation fund schemes. While life insurance through superannuation can provide some benefits including, lower premiums and the possibility of tax deductions for premium payments, there are some drawbacks that may impact your decision to choose this option over life cover outside of super.

This article will discuss both the benefits and drawbacks of purchasing life insurance through superannuation

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Name Product Past Performance - 1 Year Past Performance - 3 Years Past Performance - 5 Years Calculated fees on $50,000 balance
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Earn Velocity Frequent Flyer Points for making contributions to your super. T&Cs apply.
Enjoy discounted rates on banking products with ME Bank and health cover with GMHBA health insurance.
Choose between 14 different investment options, including a socially responsible option.
Socially responsible and ethical investment options available.
Pay no entry, exit or switching fees and enjoy a range of different investment options with QSuper.
Earn a Retirement Bonus of up to $4,800 when you open a new Income account. T&Cs apply.
Get access to one-on-one professional advice at no additional cost.
Choose investment options that align with your personal values.
Access offers, deals and discounts through the BT Super Benefits Now program.
Enjoy discounted health insurance with HCF.
Get fee-free advice on your superannuation as a BUSSQ member. T&Cs apply.
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Enjoy discounted rates on banking products with ME Bank.
Access simple personal advice at no cost.
Gain access to lifestyle offers and benefits on NAB financial products and services.
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A flexible industry super fund for people who work in Australia’s higher education and research sector.

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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 2018.
Disclaimer: 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. This article is general advice. You should consider your own personal circumstances before deciding if a superannuation product is right for you. Superannuation is a long term investment and past performance is not indicative of future performance.

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Benefits of purchasing life insurance in superannuation

  • Cover is generally more affordable as it is bought in bulk for employees; this enables applicants to secure a competitive rate.
  • The basic cover does not usually require the applicant to undergo medical underwriting. Moreover, some super funds give additional cover without requiring medical checks. There is also generally less screening of applicants occupation during underwriting.
  • Life insurance purchased through your superannuation is tax-effective as it is paid out of the contributions made by your employers or from your personal contributions. This generates a direct tax deduction for those who are self-employed and from pre-tax income in salary sacrifice cases.
  • Reduced impact on take-home salary as premiums are covered by funds accumulated in superannuation.
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Some considerations about life insurance and superannuation


A key benefit of life insurance purchased through superannuation is the reduced impact on cash flow as policy owners do not have to sacrifice any of their take home salary to cover premium payments. Policies bought under group policies through superannuation is generally much cheaper. In addition, the payments can also be funded by your employer or via salary sacrifice. As mentioned previously, cover can be acquired without medical underwriting.

Reduction of Superannuation Earnings

While the price of the premium is necessary, you should also consider the effect of the insurance premium deductions in your superannuation balance. It should be noted that since the superannuation contribution is capped, it restricts your contributions so you need to consider the impact of the payment for your life insurance policy in line with your overall retirement savings. Moreover, you are also faced with the risk of not saving enough money to meet your retirement goals.

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Drawbacks of life insurance through superannuation to be aware of

  • Limited Range of Coverage: Policies provided through superannuation are generally less comprehensive than retail policies outside of superannuation. Applicant must ensure they are aware of what they are covered for and conditions for benefit payment.
  • Convoluted Claims Process: As benefit payments are initially paid to the fund trustee, the process of distributing the benefit payments to beneficiaries can be a drawn out.
  • Beneficiary Receiving Payment: Unless the policyholder has a binding beneficiary nomination in place, there is no guarantee of who will receive the benefit payment.
  • Taxation of Benefits: There may be a tax liability for benefits paid to non-dependents. Dependents are defined as;
    • A child of the policyholder under 18 years of age
    • A surviving spouse or De facto spouse of the policyholder
    • An ex spouse of the policyholder
    • Any person who is financially dependent on the policyholder at the time of their death, or at the time that the death benefit is paid.
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What types of life insurance are available through superannuation?

Generally, death and disability cover are automatically included for life insurance cover provided through superannuation. However, as life insurance policies evolve, another type of cover has been added to cover your ability to earn that is called the Temporary Salary Continuance, also known as Income Protection.

  • Death Cover. Death cover under your super fund pays a lump sum in the event of the insured’s death.
  • Total and Permanent Disability. If you have become totally or permanently disabled, there is a Total Permanent Disability insurance built through your super fund that will pay a lump sum to help cover all your medical and rehabilitation costs. Own Occupation TPD Insurance is no longer available through superannuation.

In order to make a claim, the policyholder will need to submit evidence to the trustee of the fund to qualify for the benefit payment;

  • Identification documents of the policyholder
  • Reports from certified medical practitioners
  • Any additional medical evidence to support claim
  • Income Protection Insurance. This coverage will provide up to 75% of your total income in the event you have become disabled because of an injury that was sustained at work or suffer from a serious illness and are unable to perform duties in your occupation to the same capacity. This cover could extend up to the retirement age of 65 years old if you have become totally unable to go back to work.
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So should I take out life insurance via superannuation?

Taking out life insurance through superannuation has both benefits and drawbacks and the decision to take out cover inside or outside of super will really be dependent on ones own situation and cover requirements. Anyone considering life cover through superannuation must have a clear understanding of what they are actually covered for and the tax treatment of their policy.

Some final questions you might have about taking out cover through super

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Receive one month's premiums off every year if you pay annually upfront. T’s and C’s apply.
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2 Responses

  1. Default Gravatar
    maryamSeptember 19, 2017

    I am investigating about possibility of changing the life insured in life insurance policies and I want to do a comparative study about it. I would ask you if it is possible to change the insured in life insurance contracts based on regulations of your country. Would you please give me some information about this issue? If it is possible to change the insured under the same life insurance contract, how and under which conditions it is done, and if not, based on which reasons it is not possible?
    Best Regards

    • Default Gravatar
      JonathanSeptember 19, 2017

      Hello Maryam,

      Thank you for your inquiry.

      Generally, you can transfer life insurance to someone else provided that eligibility is being met. It is publicly accepted that this can be done in cases wherein insurable interest (adversely affected financially in the event of the death of the insured) has changed, assigning it to lenders as a collateral, or committed due to fraud and/or without consent to the life insured. However, take note that there are judicial cases where transferring it to someone without insurable interest can also be valid (see Grigsby v. Russell 222 U.S. 149 1911).

      You can send an inquiry to a financial planner for a thorough discussion about this matter.

      Hope this helps.


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