Most super funds offer some form of insurance coverage as part of their offering. This can provide both peace of mind and financial assistance if a member is unable to work, injured, or losses their life.

So, let’s explore the basics of insurance coverage through super, and some of the potential pros and cons. 

Just bear in mind that everyone’s financial circumstances are unique, and you should carefully consider what’s right for you before making any decisions.

Types of insurance coverage offered by super funds

The three main types of insurance coverage offered by super funds are, 

• life insurance, 

• total and permanent disability (TPD) insurance, and 

• income protection insurance. 

Life insurance pays out a lump sum benefit to your beneficiaries or estate if you die, while TPD insurance provides a lump sum benefit if you become permanently disabled and unable to work. Income protection insurance provides a regular income stream if you are unable to work due to illness or injury. Terms and conditions apply to eligibility. 

Possible advantages

Taking out insurance through your super fund can potentially be a cost-effective way to obtain and maintain coverage. Super funds can typically negotiate group rates for insurance coverage, which can be lower than what an individual might be able to obtain on their own.

Additionally, premiums for insurance coverage through superannuation are often deducted from your super account balance, rather than being paid out of your own pocket.

Insurance through super can also be more accessible than obtaining insurance on your own. Superannuation funds generally do not require medical examinations or underwriting to obtain default coverage (but be sure to check the fine print, and contact your super fund if you’re unsure).

Potential disadvantages 

One potential disadvantage of insurance coverage through superannuation is that the coverage may not be tailored to your specific needs. Super funds often provide a standard level of coverage to all members, which may not be sufficient if you have higher or lower insurance needs. Additionally, the terms and conditions of insurance coverage through super may not be as flexible as coverage obtained on your own.

Another potential disadvantage of insurance through super is that it can erode your super account balance over time. Premiums for insurance coverage are deducted from your account balance, which can reduce the amount of money you will ultimately have available for retirement savings. If you have multiple superannuation accounts, you may be paying for duplicate insurance coverage across your accounts, which can further erode your account balances.

Wrapping up

Insurance coverage through superannuation can provide benefits and peace of mind to members, but it is important to understand the potential advantages and disadvantages and consider your own financial circumstances and life situation before deciding. 

You can learn more about our insurance products and how they work via the site.

A financial planner can also help you understand the role of insurance in long-term planning and what is an appropriate level of cover.