Life Insurance Through Superannuation

Back to top

How does default life insurance through superannuation work?

What types of life insurance could I get through my super fund?

What are the pros and cons of life insurance through superannuation?

How do I find out if already have life insurance through my super?

What are the benefits of direct life insurance?

Where can I find and compare life insurance?

Long story short

When you join a super fund, you may automatically receive life insurance with your membership

About a third of Australians hold term life insurance this way.¹Australian Bureau of Statistics – National, state and territory population, Australian Prudential Regulatory Authority – Life insurance claims and disputes data December 2024 This is referred to as default cover.

Term life insurance and total and permanent disability (TPD) cover are common super offerings

Sometimes, income protection is also on the table.

While life insurance through your super can be cheaper and convenient, it mightn’t match with your cover preferences

As a result, some Aussies prefer direct life insurance.

How does default life insurance through superannuation work?

When you become a member of a superannuation fund, you may automatically get life insurance as part of the deal – even without sharing any information about your health and financial situation.  

This automatic cover is known as default cover. It means you’ll be insured for a certain amount, but that amount doesn’t necessarily reflect your circumstances or how much you’d like to be covered for. If you’d prefer to adjust your cover but still keep it within your super, this would be retail insurance through super, rather than default cover. 

To keep your default cover policy active, your super fund will deduct the premiums from your super balance.  

In this setup, the fund is the trustee on the policy, while you’re the beneficiary. So, if you ever needed to make a claim, you’d reach out to your super fund. They would then inform you of next steps, as well as handle passing on your information to the insurer. 

Default life insurance through your super is different to direct life insurance, where you purchase a policy directly from an insurance company or distributor. With direct life insurance, you’re in charge of making sure your premiums are paid – although direct debits may still be an option, just through your bank account this time – and you’ll need to reach out to the insurer if you want to make a claim. 

What types of life insurance could I get through my super fund?

Policies differ between super funds, but you’re likely to see term life insurance (sometimes called death cover) and total and permanent disability (TPD) insurance offered. Income protection insurance may also be offered, but it’s not as common. Unfortunately, you’re not likely to see trauma insurance as an option through your super since these kinds of events tend not to meet super release conditions. 

What are the pros and cons of life insurance through superannuation?

There are lots of things to like about having life insurance through your superannuation. Unfortunately, there may be some disadvantages too. Some you may be able to live with, others might have you looking at direct cover options. 

Pro: It’s convenient.

Since your premiums come straight out of your super balance, it’s truly set and forget. Although, you’re hopefully checking in on your super balance every now and again, and counting down the years until early retirement. 

Con: It can eat away at your super balance.

This convenience can come at a cost with your super balance not quite reaching its full potential because the life insurance premiums are deducted from your super balance. If you hold several super accounts with their own life insurance policies too, you may see this effect further multiplied.

Pro: It’s easy to get.

If you have a pre-existing medical condition or a dangerous occupation, you may find it harder to get direct life insurance. Life insurance through superannuation, though, could be an option for you, particularly as you may not need to undergo any medical or health checks. 

Con: You may need to jump through a few hoops to get and keep it.

Australian legislation means that new fund members aged under 25 years don’t get automatic cover. The exception is if you work in a dangerous job. 

Additionally, your cover may be cancelled if your balance dips below $6,000 or no contributions are made to your account for at least 16 months. You’d need to reach out to your super fund to tell them you want your cover to stay in effect in these circumstances. Unfortunately, funds only have to give you advance warning that cancellation is on the cards when it comes to a lack of contributions. Legally, they don’t need to get in touch if a low balance is the reason. 

Pro: Your premiums may be cheaper.

Superannuation funds purchase their default life insurance policies in bulk. And, as any savvy shopper knows, buying in bulk can make things cheaper. Your fund may then choose to pass this saving onto you. 

Con: Your cover isn’t specific to your circumstances and might be lower.

Like buying one-size-fits-all clothing, you can’t really complain if the cover doesn’t sit right. After all, it wasn’t underwritten for your circumstances. 

What you can do, though, is see if you’re able to adjust your default insurance within your super to align more closely with what you’re after. This can mean having a few medical and health check-ups, as well as a change to your premiums. 

Pro: It can be a tax-effective way to pay for life insurance.

If your marginal tax rate is more than 15%, you may find it more effective to have life insurance through your super than other avenues. This is because any super contributions from you or your employer are taxed at 15%, whereas you’ll have a marginal tax rate greater than 15% if you earn over $18,200 for the 2024–25 financial year.

Con: You won’t be able to claim any income protection premiums as tax deductions.

Income protection premiums are the only kind of life insurance premiums that are tax deductible. But you can’t claim these deductions if your premiums come out of your super balance. 

Helpful tip

If you’re young and single, life insurance through your super may tick plenty of boxes. But as you get older, find that special someone, and maybe even start a family, you might find your opinion changing in the direct insurance vs through super debate. Like the clothes you loved as a teenager, your cover may not fit you quite as well as it once did.

Adrian Bennett

General Manager for General Insurance

How do I find out if already have life insurance through my super?

There are three simple ways you can find out if you already have life insurance through your superannuation: 

• call or email your super fund
• check your superannuation membership account details online
• read through your most recent superannuation annual statement. 

Whichever option you pick, you should also be able to check what you’re covered for, including any exclusions and your cover amount, and how much your premiums are, including any loadings. 

If you’d like to cancel your cover or reduce it, you’ll need to get in touch with your super fund. They can then advise you of the process and let you know when any changes are made, including the date your cover will end if you’re cancelling it. 

What are the benefits of direct life insurance?

Going through your superannuation isn’t the only way to get life insurance. Instead, you might want to purchase cover directly from an insurer. This means: 

• your cover can be more specifically tailored to your circumstances, including the type of life insurance and your cover amount
• your premiums won’t erode your super balance
• your cover can have a later expiry date – sometimes lasting decades longer than in-super options – reducing your risk of going without cover or trying to buy direct when you’re older and more likely to have pre-existing conditions
• any income protection premiums are tax deductible
• you can shop around life insurers without upending your super balance too. 

Where can I find and compare life insurance?

If you’d rather keep your super simple and just for your retirement, we can help you compare a range of direct life insurance policy options from select different insurers. Our online comparison tool is quick and easy to use so you can compare quotes side by side.