Life insurance through superannuation

Life insurance can be within your super, bought as a standalone policy, or both. Find out which option works best for you.

Superannuation insurance vs direct life insurance Key differences
Super life insurance providers Compare

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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.

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:

Simple Extraction

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.

Surgical Extraction

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.

Wisdom Teeth

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 insuranceSuperannuation insurance
How do you buy a policy?Buy from an insurer or via a brokerCover is often, but not always, included automatically in a super account
About the applicationApply online or over the phone. You may need to do a medical as part of the underwriting processGuaranteed 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 benefitsYour 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 availablePayments are taken directly from your super contributions, and funds can get beneficial tax relief on premiums
How to amend or cancel a policyContact the life insurer directly and follow steps to cancelEdit 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 policyYou'll have to get in contact with your super fund to add or edit your preferred beneficiary

Compare superannuation insurance in Australia

ProviderDeath CoverTPDIncome Protection Maximum Monthly CoverOther Eligibility Requirements
Bendigo Bank$2,000,000$2,000,000Up to $20,000 a month or 85% of your salary (whichever is lower)
  • Australian citizen aged 25+
  • Have a $6,000 account balance or request default cover to be provided to you
ZurichNo maximum amount$5,000,000$30,000
  • Australian citizen or applying for permanent residency and living in Australia
  • Application questions on your health, financial situation, lifestyle and pastimes
Suncorp$5,000,000$3,000,000$25,000
  • 25-65 year old Australian citizen or non-Australian resident with a valid visa
  • Have a $6,000 account balance
AustralianSuperUnlimited$3,000,000Up to $30,000 a month or 85% of
your salary (whichever is lower)
  • Income protection: Ages 15-70
  • TPD cover: Ages 15-65
BTPre-approved amountPre-approved amountThe greater of the income ratio and 75% of
monthly earnings
  • Approval depends on meeting applicable eligibility conditions, the results of a medical assessment and acceptance by the insurer
ClearView$20,000,000$5,000,000$30,000
  • Be eligible to contribute to super, have contributions made on your behalf or be able to fund premiums by rolling over super benefits from another fund to this one
MLCNo general maximum, but special terms
may apply for benefits greater than
$15 million
$5,000,000$60,000
  • Life cover: Ages 16-60 (level premiums) or 16-65 (stepped premiums) can apply, 74 expiry age
  • TPD standalone cover: Ages 16-60 can apply, 74 expiry age
TAL$2,000,000$2,000,000$12,000
  • 18-74 year old Australian citizen or New Zealand citizen residing permanently in Australia
  • Level premiums are available if you're aged 59 or under
WestpacPre-approved amountPre-approved amountThe greater of the income ratio and 75% of
monthly earnings
  • Aged 25+ or notify them if you want cover earlier
  • Cover starts when your account balance is $6,000+

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

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4 Responses

    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.

      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

    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,

      Maurice

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