Life Insurance & Superannuation

Keep reading to learn more about life insurance and superannuation, including potential pros and cons.
life insurance and superannuation

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When you have life insurance through super, are you still paying premiums?

Unlike life insurance policies outside of super, payments for your life insurance held within your super fund are deducted from your super balance to pay the life insurance premiums. If you’re comparing life insurance options, it’s important to understand how life insurance through superannuation works, what it covers you for, and what it costs.

Is life insurance compulsory with superannuation?

No, not all super funds include life insurance. So it’s important to contact your super provider, or check your annual statement, to see if you’re covered with life insurance as part of your super.

Life insurance through super: pros and cons

Pros of life insurance through super

  • It can be cheaper because life insurance premiums are available in bulk to super fund members1
  • Because you don’t pay via your income, it could be more affordable, even on a tight budget
  • You won’t miss a payment because deductions are automatically made from your super fund balance
  • Some funds automatically accept you for cover without requiring a health check
  • You can usually choose the amount for which you’re covered

Cons of life insurance through super

  • The cover you receive may be limited and exclusions may apply1
  • The default or standard levels of cover may not apply to your particular circumstances
  • If you stop working for a while your insurance will lapse, leaving you at risk
  • If you change superannuation funds the insurance is not portable
  • If you don’t specify the beneficiaries, the super trustee will be able to determine who receives the payout of your super life insurance (which may be against your wishes)
  • Any payout will be processed through your super fund, which could make it slower for your family to receive the funds
  • It ends when you turn sixty-five, so you may need an additional life insurance policy after your sixty-fifth birthday
  • If you change jobs, your premiums may increase
  • Because payments are deducted from your super balance, you may need to make additional payments to keep your super fund viable for your living expenses when you retire

superannuation life insurance info

Are superannuation life insurance premiums tax deductible?

No, the Australian Tax Office2 states that: “You can't claim a deduction for a premium or any part of a premium where the policy is taken out through your superannuation, and insurance premiums are deducted from your super contributions.”

This means that you can’t claim tax deductions for life, trauma care, or critical care insurance premiums.

What’s normally covered with life insurance via superannuation?

The most basic superannuation based life insurance policies provide three types of cover:

Death cover:
The payment your beneficiaries will receive when you (assuming you’re the policy holder) dies; this may be paid as a single lump sum or in fixed regular instalments3.

Total and permanent disability cover (TPD): If you suffer a permanent and lifelong disability, meaning you’re unable to continue working, you will receive a payment to cover your ongoing living expenses4.

Income protection cover: If you suffer an accident or trauma and can’t work for a time period, you’ll be paid benefits to cover your ongoing living expenses while you recover5.

Different superannuation funds have different levels of life insurance protection. So if you’ve already got a life insurance policy, it’s important to check with your provider, or read over your annual superannuation statement to see what level of life insurance you’re receiving.

Alternatively, if you’re thinking of purchasing a life insurance policy, and you’d like to learn more about policies that may be right for you, feel free to call us on 13 19 20.

How do I check my superannuation life insurance policy?

The ASIC advises you to call your superannuation provider or check your annual statement1. Make sure to check all of you superannuation accounts if you have funds with multiple providers.

It’s also a good idea to check:

  • The type of insurance cover you have
  • How much cover you have
  • How much you’re paying for the cover

How to compare superannuation-life insurance with insurance policies outside of superannuation?

After checking what your superannuation life insurance cover provides, you can start comparing life insurance outside of super policies with Lifebroker. You can compare policies online, or call us on 13 19 20, and speak to one of our expert life insurance advisors.

You can also use your superannuation policy for baseline life insurance, and take out an additional policy to get the extra features you need, thereby topping up your level of total life insurance to get the right balance for your needs.

Some things to consider when comparing policies are:

  • Levels of cover: does it include death over, TPD, and income protection?
  • Affordability: what are the monthly premiums, and does the cost fit into your budget?
  • Your age: if you’re soon approaching or over the age of 65, your superannuation based life insurance may not be appropriate
  • Flexibility: can you nominate the beneficiary and make adjustments to the level of cover provided?

Start comparing life insurance policies today

If you need any help choosing a life insurance policy or comparing policies, contact our friendly team on 13 19 20.