What you need to know:
- Life cover is often included in your superannuation by default.
- It is often cheaper to hold life insurance within super, but cover is more basic.
- Going direct with an insurer gives you more tailored insurance.
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!
Life insurance through super: Pros and cons
Pros
- Premiums can be cheaper
- Convenience – payments come out of your super
- Fewer health checks
- Less paperwork
- Tax perks may apply
Cons
- Reduces your retirement balance
- Cover might be limited with less flexibility
- If you change funds, your cover may end
- Your nominated beneficiary might not be guaranteed
- Payouts can be delayed
How does life insurance through super work?
Life insurance held 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.
Members of superannuation funds may hold up to 3 types of insurance:
Death cover
This policy 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 (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
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 can help you meet the cost of bills and keep your lifestyle going.
Insurance premiums are paid out of the money in your super account, meaning you don't have to pay from your take-home earnings.
6 key differences between direct life insurance and superannuation insurance
| Direct life insurance | Superannuation insurance | |
|---|---|---|
| How do you buy a policy? | Buy from an insurer or via a broker | Cover is often, but not always, included automatically in a super account |
| About the application | Apply online or over the phone. You may need to do a medical as part of the underwriting process | Guaranteed acceptance on shared terms others get through group life cover |
| How much does it pay out? | You have more flexibility to choose how much cover you want, including higher benefits | Your overall cover amount may be comparatively low |
| How do premium payments work? | Payments come out of your bank account, and sign-up offers and discounts may be available | Payments are taken directly from your super contributions, and funds can get beneficial tax relief on premiums |
| How to amend or cancel a policy | Contact the life insurer directly and follow steps to cancel | Edit or cancel your cover in your super account online or in-app |
| How do you choose your beneficiaries? | You nominate your beneficiaries with the insurer when you take out a policy | You'll have to get in contact with your super fund to add or edit your preferred beneficiary |
Compare superannuation insurance in Australia
| Provider | Death Cover | TPD | Income Protection Maximum Monthly Cover | Other Eligibility Requirements |
|---|---|---|---|---|
| Bendigo Bank | $2,000,000 | $2,000,000 | Up to $20,000 a month or 85% of your salary (whichever is lower) | |
| Zurich | No maximum amount | $5,000,000 | $30,000 | |
| Suncorp | $5,000,000 | $3,000,000 | $25,000 | |
| AustralianSuper | Unlimited | $3,000,000 | Up to $30,000 a month or 85% of your salary (whichever is lower) | |
| BT | Pre-approved amount | Pre-approved amount | The greater of the income ratio and 75% of monthly earnings |
|
| ClearView | $20,000,000 | $5,000,000 | $30,000 |
|
| MLC | No general maximum, but special terms may apply for benefits greater than $15 million | $5,000,000 | $60,000 | |
| TAL | $2,000,000 | $2,000,000 | $12,000 |
|
| Westpac | Pre-approved amount | Pre-approved amount | The greater of the income ratio and 75% of monthly earnings |
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.
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.
Financial adviser Brenton Tong, who is group CEO of Financial Spectrum, told Finder: "If you want full coverage for a broader range of events, you need to take out a fully underwritten TPD policy."
💡Quick tip: If you hold insurance within your super, ask the fund for a list of excluded occupations.
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
Finding a life insurance deal early can help you lock in more favourable terms. Compare policies side-by-side.
Or check out these comprehensive guides on superannuation:
- How to choose a super fund
- Superannuation options if you're self-employed
- Our picks of the best super funds
More guides on Finder
-
Two Broke Chicks Podcast Episode #104: Career tips from the ultimate work wives
Trying to land your dream job? Step into our office. Ultimate work wives Sal and Al dish their top tips to kick start your career in episode #104 of Two Broke Chicks.
-
2021 Genesis GV80 Review
The 2021 Genesis GV80 stands out from the crowd, showcasing what the luxury brand is about.
-
Travel insurance: Covid
Here's how travel insurers are responding to the pandemic.
-
New international travel rules: Quarantine, proof of vax, visas and more explained
When do flights resume? What are the quarantine rules? How do I prove I'm vaccinated? The experts answer all your questions.
-
How to stake Tron
Find out how to stake your TRX tokens and how Tron’s delegated proof-of-stake consensus mechanism works.
-
Returning to work? Expert tips to deal with your dog’s separation anxiety
Get tips direct from the experts on how to deal with your dog's separation anxiety as life returns to normal and you head back to the office.
-
9 ways to save $2,800+ on your bills
An investment of a few hours could save you thousands of dollars – here's how to bring down your household bills.
-
3 dental insurance deals to put a dent in your post-lockdown dentist trip
Here's how you can unlock no-waiting-period dental with ahm, Peoplecare and HIF.
-
Travel insurance for seniors over 80
Travel insurance is an essential expense for anyone planning a trip overseas, though sometimes it can be difficult to find cover if you are over 80 years of age.
-
Illuvium review: Is this a true AAA NFT game?
Illuvium is an open world RPG meets auto battler with an economy based on collectable NFTs and resource mining. Is it worth your ILV stake?
Ask an Expert
When should an insurance be unnecessary in superfund?
Hi ASAJILE,
Thank you for your question.
finder.com.au 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,
Zubair
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.
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,
Maurice