How to Build a Safety Net With Life Insurance Super Funds – 360 Financial Strategists

Many superannuation funds provide insurance options such as life, total and permanent disability (TPD), and income protection for their members. When assessing your insurance coverage, it’s crucial to examine whether your super fund includes these benefits.

Take the time to compare these offerings with life insurance through super options available outside of super to ensure you secure the most suitable policy for your needs.

Types of life insurance in super

Superannuation funds commonly offer three types of life insurance options for their members:

  1. Life cover, also known as death cover, provides a lump sum or income stream to your beneficiaries in the event of your death or if you’re diagnosed with a terminal illness.
  2. Total and permanent disability (TPD) insurance offers a benefit if you experience a severe disability that prevents you from returning to work.
  3. Income protection insurance, also called salary continuance cover, ensures you receive a regular income for a predetermined period if you’re unable to work due to temporary disability or illness.

Most super funds automatically include life cover and TPD insurance for their members, with some also offering income protection insurance. Typically, these insurances are provided without the need for medical checks and cover a specified amount.

In super, TPD insurance coverage often ceases at age 65, while life cover typically ends at age 70. Conversely, outside of super, coverage usually continues as long as premiums are paid.

Insurance coverage on inactive super accounts

As per legislation, insurance on inactive super accounts—those without contributions for at least 16 months—will be automatically canceled by super funds. Additionally, individual super funds may enforce their own regulations, requiring insurance cancellation on accounts with insufficient balances.

Your super fund will notify you if your insurance is nearing expiration.

To maintain your insurance through self-managed super funds, you must inform your super fund or contribute to the respective super account.

You may consider retaining your insurance if you:

  • Lack insurance coverage through another super fund or insurer.
  • Have specific needs, such as dependents or employment in a high-risk occupation.

Insurance for Individuals Under 25 or with Low Super Balances

If you’re a new member of a super fund under the age of 25, or if your account balance falls below $6000, insurance coverage may not automatically be provided unless:

  • You proactively reach out to your fund to request insurance through your super.
  • You work in a high-risk occupation, and your fund opts to grant you automatic cover—though you retain the option to decline this coverage.

In the event your balance dips below $6000 and you already have insurance, typically, you won’t lose your coverage.

Utilize the Life Insurance Calculator to assess whether life insurance through your super is necessary and determine the appropriate coverage amount.

Navigating superannuation and insurance can be intricate. For assistance, reach out to your super fund or consult with a financial adviser.

Pros and Cons of Life Insurance Through Superannuation


  • Cost-Effective Premiums: Premiums are typically more affordable as super funds purchase insurance policies in bulk.
  • Convenient Payment: Insurance premiums are automatically deducted from your super balance, streamlining the payment process.
  • Reduced Health Checks: Many super funds offer default coverage without requiring extensive health checks, which can be advantageous for individuals in high-risk occupations or with pre-existing health conditions. However, it’s essential to review the product disclosure statement (PDS) for any exclusions or treatment of pre-existing conditions.
  • Option for Increased Coverage: You can often augment your default coverage level, though this may involve answering medical history questions and undergoing a medical assessment.
  • Tax Efficiency: Contributions made by your employer and through salary sacrifice are taxed at a lower rate of 15% compared to most individuals’ marginal tax rates, enhancing the tax effectiveness of paying for insurance through super.


  • Limited Coverage: Superannuation-based insurance may offer less coverage compared to policies obtained outside of super. Default insurance may not cater to your specific needs, and certain eligibility criteria may apply.
  • Risk of Coverage Termination: Changing super funds, cessation of contributions, or an inactive super account may result in the termination of your insurance coverage, potentially leaving you uninsured.
  • Diminished Super Balance: Insurance premiums are deducted directly from your super balance, reducing your retirement savings over time.

Before switching super funds, it’s crucial to review your insurance coverage, particularly if you have pre-existing medical conditions or are over the age of 60, as obtaining desired coverage may not be guaranteed.

How to Review Your Insurance Coverage Through Superannuation

To ascertain your life insurance through super funds, you can:

  1. Contact your super fund via phone.
  2. Access your super account online.
  3. Refer to your super fund’s annual statement and the Product Disclosure Statement (PDS).

Upon examination, you’ll discover:

  • The type of insurance you possess.
  • The extent of coverage provided.
  • The premium amount allocated for your insurance.

Your super fund’s website typically hosts a comprehensive PDS elucidating the insurer’s identity, coverage details, and claim procedures.

If you maintain multiple super accounts, you might be paying premiums for numerous insurance policies, which could diminish your retirement savings. Assess whether consolidating your policies into a single fund suffices or if additional coverage is necessary.

When reviewing your superannuation insurance, scrutinize for any exclusions or premium loadings. Loadings denote a percentage increase on the standard premium, often applied to individuals deemed higher risk due to factors such as occupation, pre-existing medical conditions, or smoking status.

Should you suspect an erroneous classification by your super fund, promptly notify them to rectify the situation, potentially saving on unnecessary insurance expenses.

Count on financial advisors to manage your life insurance and super funds! A financial advisor can guide you in making the right financial decisions.

To find out if our strategies are right for you, feel free to contact 360 Financial Strategists online or on 03 9427 0855.