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Insurance in super

Did you know you may be able to get low-cost insurance through your super fund? In fact, default funds are obliged by law to provide a minimum level of cover for most Australians. Despite the peace of mind insurance offers and its potential to make a huge difference to people’s lives, many people remain under-insured and aren't aware of the insurance options available to them.

If you’re thinking about getting some insurance to protect you and your family, it’s worth checking out what’s on offer from your super fund as they do tend to offer very competitive premiums. You may even discover you already have insurance through your super you weren’t aware of.

COVID-19 early release may impact insurance

The Government has temporarily introduced changes to allow people experiencing financial difficulties as a result of the coronavirus (COVID-19) crisis to withdraw some of their superannuation early. See Accessing super in tough times for more detail.

If you are thinking of applying for early access to your super, it’s important to consider how it may impact the insurance in your super account.

Your insurance may be cancelled after withdrawing some of your super early if:

  • you withdraw your entire superannuation balance which leads to the closure of your account
  • your balance becomes too low to cover the costs of your insurance premiums.

So, before applying for early release, stop and think about the insurance in your super account. If you have any questions about your insurance in super, you should contact your superannuation fund.

Recent changes to insurance in super

The Government has recently introduced two sets of important reforms that may affect any insurance you have through your super fund. The reforms are intended to prevent superannuation accounts from being eroded by unnecessary fees and insurance premiums.

Protecting Your Super

From 1 July 2019, the ‘Protecting Your Super’ rules mean your insurance could be cancelled if your account hasn’t received contributions for at least 16 months.

If you want your insurance cover to continue in an existing superannuation account which hasn’t received any recent contributions, you need to contact your fund and opt-in, or make a contribution to your account.

Your fund will send you three notices prior to cancellation of insurance and we urge you to pay attention to this correspondence so that you understand your options.

Putting Members’ Interests First

The Putting Members’ Interests First rules mean that from 1 April 2020, your fund may not be able to automatically provide you with insurance cover.

If you are under age 25, or your account balance is under $6,000, you will have to specifically opt-in to be able to qualify for insurance through your super fund.

What kinds of insurance are offered through super?

If your super fund offers an appropriate level of cover for your needs, it can be a really simple and cost-effective way to insure yourself and your family.

The main insurance types offered by superannuation funds include:

  • Life insurance
  • Total and permanent disability (TPD) insurance
  • Income protection (IP) insurance

Download a copy of the guide Super insurance explained.

Life insurance

If you hold life insurance (also known as death cover), the beneficiaries you nominate on your policy, usually your family, receive a benefit in the event of your death. Depending on the rules of the super fund, this money can be paid to them either as a lump sum or as an income stream, and provides them with financial support to ensure they can continue paying the bills after you’re gone.

Choosing life insurance is a big decision and you need to be realistic about how much cover you need. Consider factors such as how much debt you have, and how much your family will need to maintain their lifestyle both now and in the future.

Total and permanent disability (TPD) insurance

TPD insurance provides a financial safety net if you become seriously ill or permanently disabled and are no longer able to work. TPD insurance is designed to help cover the costs of rehabilitation as well as support the future cost of living.

It is important you check how your insurer defines TPD before taking out a policy as each insurer generally has its own definition. Usually TPD is defined as either:

  • When you can no longer work in your usual occupation; or
  • When you can no longer work in any occupation.

Income Protection (IP) insurance

IP insurance provides you with income for a certain period if you can’t work due to a temporary disability or illness. Unlike Life or TPD insurance, IP insurance covers you just for the income lost through your inability to work. For families or individuals who rely heavily on one income to meet expenses, IP insurance can be an extremely important consideration.

Again, each policy differs in how it defines disability and illness and the type of benefits offered, it’s important to make sure you fully understand what you’re getting.

Generally, IP insurance will offer coverage up to a maximum of 75 per cent of your wage for a maximum amount of time – this could be two or five years or until you’re 65.

You will need to choose a waiting period when you select your coverage level. This is the amount of time you’ll have to wait after you become ill before you can make a claim. Periods usually range from 30 to 90 days so consider how much leave you have saved up with your employer when making your decision.

Making an insurance claim

See our Making an insurance claim page.