Superannuation insurance: This is what you’re covered for

Matthew Lang

Matthew Lang

Updated 14/04/2022

Superannuation funds offer members the option to take out insurance linked to their accounts. Here’s what they are and what you can expect them to cover.

Superannuation insurance: This is what you’re covered for

Life & death insurance through superannuation


Did you know that most super funds offer you the option to take out different types of life insurance cover? 

Sometimes it’s already included when you sign up, sometimes you need to opt-in, but your regular contributions are always deducted from your super balance. (Don’t worry, you can also opt-out whenever you feel like it.)

Depending on your personal circumstances and the type of cover you want, this can actually be more affordable than getting a separate insurance policy.

Keep reading to learn about the different types of insurance in super and what they cover you for.

Key Points

  • There are usually three types of life insurance offered with super, which are life cover, total and permanent disability (TPD) and income protection.

  • Your regular life insurance contributions come out of your superannuation, improving your cash flow.

  • You can claim your income protection cover back on tax.

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What types of insurance do I get with my super?

Superannuation providers usually offer three types of insurance to active members who are 25 or older and have a balance of at least $6000:

  • Life insurance: Life cover pays out a lump sum payment or income stream to your beneficiaries or dependents should something happen to you. That’s why it’s also called death cover.

  • Total and permanent disability (TPD) insurance: Also known as permanent disablement cover, this type of policy provides a lump sum payment and a  financial safety net should you become seriously injured or ill and unable to work.

  • Income protection insurance: Sometimes called salary continuance cover, this type of insurance will pay up to 70% of your wages for a set period if you can’t work over a prolonged period of time due to an injury or illness. Some super funds automatically provide default insurance for income protection in their policies.

What are the benefits of having life insurance as part of my super?

Convenience is probably the most appealing thing about having your life insurance attached to your super. 

Not only are the premiums lower than taking out a separate policy (that’s because your fund purchases them in bulk), but paying them is also less of a hassle. 

That’s because they’re automatically deducted from your super balance – so it’s one less thing to remember. 

Plus, super contributions are taxed at a lower rate (15%), which makes your insurance premiums tax-effective, too.

However, policies within your superannuation are not tailored to any member’s particular health circumstances. There are also pre-existing exclusions in place, but this depends on the type of cover you’ve added to your super.

Is the level of insurance cover from your super different?

The level of life insurance you get through your super is usually pretty standard and somewhat limited to other policies. 

There’s typically an option to upgrade your policy for better coverage – if you’re willing to answer a few additional health-related questions. This is called underwriting, which you can find more about here.

It’s also important to note that, unlike a separate policy, any insurance cover taken out as part of your super can end once your account becomes inactive, e.g. because you’ve changed funds. But then you can of course opt-in with your new provider.

What is death cover in superannuation?

Death cover is the same as life insurance. If you were to pass away, your family would receive a lump sum death benefit to support them. 

Depending on the super fund’s policies, this money can also be set up as a regular income stream that would mimic the inflow of money they benefited from while you were alive.

Do I need death cover (life cover) in my super?

Taking out death cover/life insurance is not compulsory. You can opt-out at any point. Whether or not you need it may depend on your individual circumstances. 

For most people, whether or not death insurance is worth getting depends on their life stage. If you are young and don’t have a spouse or children, then having premiums deducted from your super balance for a life insurance policy probably isn’t worthwhile. 

However, if you have a family and work in a high-risk industry, then having a life insurance policy starts to make much more sense.

Are TPD payments from super taxable?

Any super contributions are taxed at the lower tax rate of 15%. If you have taken out TPD cover through your super, your premiums are deducted from your super account balance and have therefore already benefited from the lower tax rate

How do I claim TPD from super?

If you wish to make a TPD claim, your super fund should be able to guide you through the process. Chances are, they’ll need:

  • Any medical records related to your permanent injury or illness

  • Details on your occupation and the kind of tasks it involves

  • Any proof of income, tax or financial statements to assess your current income.

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What is income protection in my superannuation?

Income protection insurance is a monthly benefit that covers you in case you get injured or sick and can’t work for a while as a result. It can cover up to 70% of your income, based on your earnings over the 12 months prior to the claim.

Getting this type of insurance through super helps to provide a level of financial protection to you and anyone who depends on your income should the unexpected occur.

Can you pay income protection insurance premiums through your super?

Yes, if you hold an income protection policy as part of your super, your premiums are automatically deducted from your super balance.

Is income protection insurance in my superannuation enough to cover my income?

That depends largely on your lifestyle and your expenses. For example, if you’re self-employed or run your own small business, you probably don’t have paid annual leave or sick days. 

Plus, you’ll likely have other people depending on your income. In this case, it can be beneficial to have income protection insurance. 

Default cover, like the one found in your super, may not actually cover up to 70% of your income. You should check the Product Disclosure Statement (PDS) of your superannuation income protection to find out the level of cover you have.

Once you know how much you’re covered by the default cover in your super, you can then decide if it’s enough to meet your needs going forward.

To figure out if the policy offered by your super fund would be enough to cover you and your family should something happen, it can be a good idea to create a budget spelling out all your regular expenses. 

This can give you a good idea of what needs to be covered should you be unable to work for a while.

Can you have more than one superannuation income protection policy?

You can if you have more than one super account. And yes, you can claim from multiple insurers.

However, you won’t be able to claim more than the approved maximum payout across all policies and won’t be able to claim more than 70% of your income.

What other types of insurance are available through your super fund?

Life insurance or death cover, TDP and income protection insurance are the most common types of insurance policies offered through your superannuation provider.

Taking our insurance policies as part of your superannuation can have many benefits. But the question remains whether these policies offer everything you need. Our experts compare policies from Australia’s top life insurers within a matter of clicks – so you can be sure you’re covered.

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This guide is general in nature and opinion only. It does not take into account your objectives, health situation, financial situation or needs and should not be taken as medical or financial advice. Before acting on any financial product or general advice you should consider whether it is appropriate in light of your particular objectives, financial and medical situation or needs, and should check with a financial professional before making any decisions.

Matthew Lang is the general manager of life insurance at Compare Club. Matthew leads a team of dedicated professionals who are passionate about helping individuals and families make informed decisions about their life insurance needs. Whether it's finding the right coverage for your specific circumstances, comparing policies, or optimizing your existing policy, Matthew and his team are here to provide expert guidance and support.

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Matthew Lang

General Manager of Life Insurance