What are the types of life insurance offered by super funds?

  • November 22, 2020 12:14 AM AEDT
  • Team Kalkine
What are the types of life insurance offered by super funds?


  • Life insurance is a prerequisite in today’s times, especially for those who have dependents. But insurance does not come cheap.
  • Getting insurance through super funds is a new fad almost 70% of Australians are following.
  • Super funds buy policies in bulk and get a discount from the insurance companies and therefore, proves to be cost-effective for insurance seekers.
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Life insurance is something that everyone needs. Especially, the ones who have dependents. Also, an ideal situation calls for opting death benefit, total and permanent disability (TPD), income protection and trauma insurance.

However, this type of ‘assorted’ comprehensive insurance cover can burn a hole in the pocket and may cost as high as thousands of dollars per year. Clearly, affording this is not everyone’s cup of tea.

Hence, mostly people need to be selective about the insurance cover and even compromise on a few things. Majority of the people opt for death benefit insurance but even that is not cheap.

This is why, more and more people go for the default death benefit cover offered by the superannuation fund, which is way more pocket-friendly.

The reason for this lies in an interesting fact that superannuation funds buy policies in bulk and get a discount from the insurance companies. Also, super fund insurance payment can be done with pre-tax dollars but if one buys insurance outside the super fund, he has to use after-tax dollars.

It is claimed by various research agencies that more than 70% of the Australians opt for super funds. Most of them offer all – life, total, TPD and income protection insurance for their policy holders.

Also read: Is it time to switch your health insurance?

Types of life insurance in super

Super funds usually provide three kinds of life insurance for their members.

  • Life cover - Also known as the ‘death cover’, this cover pays a lump sum or income stream to the policy holder’s beneficiary in case he dies or has a terminal illness
  • TPD insurance – This one gives a benefit if one becomes seriously disabled and is unable to work again
  • Income protection insurance – Also known as salary continuance cover, this one provides with a regular income for a specific span of time if the policy holder is unable to work due to any disability.

Majority of the super funds already come along with life cover and TPD insurance. While a few others offers income protection insurance, this insurance comes with a specific amount and is commonly available without medical checks.

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Super funds can cancel insurance too!

As per the law, super funds can cancel insurance on idle super accounts that have not received premiums for at least 16 months.

To add to this, super funds might have their own regulations and operating mode. The point is that balance in the super account should not be too low.

In general cases, the super fund contacts the individual if the insurance is about to end. The policy holder might want to retain the insurance if he does not have any other insurance, if he has a particular need for it or basically has dependents.

Insurance for people under 25

Insurance will not be provided if the candidate is a new super fund member less than 25 years of age. One needs to write to the fund to request insurance through the super and if you work in a dangerous, high-risk job, one can cancel the cover if not required.

Advantages and disadvantages of life insurance through super fund


The premiums of a life insurance policy via super fund are comparatively lesser because the super fund buys insurance policies in bulk.

Then, the insurance premiums are automatically deducted from the super balance and are easy to pay.

Also, most of the super funds will, by default, accept that the holder already goes through regular health checks. This can be useful if the cover holder works in dangerous circumstances or has health conditions that can make it difficult to get insurance outside super.  

Then, the policy holder can increase the amount of cover he has above the default level. But this generally involves a few questions about the medical history.

Paying for an insurance under super fund is quite tax effective too. Premiums of the insurance under super fund and salary sacrifice contributions are taxed at 15%. This is lower than the marginal tax rate for most of the people.


A TPD insurance cover in super fund generally ends at the age of 65. Life cover ends at 70. Whereas, outside super fund, any cover continues till the holder is submitting premiums.

Secondly, the amount of cover the policy holder can get via super fund is generally lower than the cover one gets outside super.

If one changes super funds, or the contributions stop or the super account becomes inactive, the cover may end, and the holder could end up with no insurance.

Next, premiums of the insurance are deducted from the super balance. This lowers the savings for retirement.

Key Takeaway 

It is quite significant that one has an insurance with superannuation fund to increase the super premiums to cover the cost of the insurance.

If the policy holder is unable to decipher what the policy has on offer, he/she can contact their insurer or fund or financial adviser. Also, one must learn what benefits the fund will provide once the policy holder retires.

Opting for insurance through super can be a good strategy to lower the cost. The key is getting the balance right.


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