Getting the right insurance through your super fund


It's not long until our annual super statement arrives in the mail. Most of us will head straight to the part that reveals investment returns, but don't overlook the section on insurance.

There's a lot to love about superannuation - and it goes beyond funding for a decent retirement.

Our super can provide financial benefits long before we hang up our work boots.

getting the right insurance through your super fund

One such benefit is personal insurance.

What's up for grabs?

Chances are, your super fund automatically provides:

  • Life insurance, which pays a lump sum if you die, and
  • Total and permanent disability (TPD) insurance, which provides a payout if you become totally and permanently disabled because of illness or injury. 

Your super fund may also provide income protection insurance though this tends to be an opt-in rather than automatic benefit.

There are a few exceptions.

Your fund is unlikely to provide personal insurance if you're a new member aged under 25, or if you have an account balance below $6000.

If this sounds like you, there is always an option to request cover but you'll need to let your fund know. Cover is not automatic.

Is the level of cover right for you?

It's always reassuring to know you have life and TPD insurance through your super.

One of the pluses of insurance through super is that your fund buys cover in bulk. This helps to keep the premiums low.

The drawback is that your fund doesn't know your particular needs.

Think of it this way.

A 30-year-old fund member may be single, living at home, and without any debt.

Another member of the same fund, may also be aged 30, but be a single parent of two kids with a $500,000 home loan.

Clearly, the two fund members have very different insurance needs.

The default insurance offered by super funds cannot automatically identify the different insurance needs of each member.

It's up to you to adjust your level of cover so that it's right for your needs.

Getting the right level of cover

Knowing you have the right level of insurance through super is a four-step process:

1. Check your current insurance cover

The first step is to check how much cover you currently have in place.

That's easy.

Log into your member account online, review your latest super statement, or pick up the phone and ask your fund.

2. Understand how much cover you need

A handy tool to gauge how much cover you need is the Life Insurance Needs Calculator on the Moneysmart website.

Your super fund website may have a similar calculator.

Use it to get a clear picture of your insurance needs.

3. Compare the cover you need to the protection you have in place

If there is a shortfall in your level of cover, you could be underinsured.

This could see your family face financial hardship if the unexpected happened.

4. Adjust your level of cover

If you'd like to boost your personal insurance, simply get in touch with your fund.

Be aware, insurance premiums are paid from your super savings.

So, an increase in cover can impact your super savings on retirement.

There is always the option to take out separate cover outside of super. But the premiums will be paid from your own pocket, and it could cost more than cover arranged through your super.

Talk to your fund

Having the right level of insurance through super doesn't have to be hard work.

If in doubt, call your phone to know how much cover you have, and if necessary, request an increase.

Hopefully, you and your family will never have to make a claim. But it's reassuring to know you have the right level of protection for your needs at all times.

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A former Chartered Accountant, Nicola Field has been a regular contributor to Money for 20 years, and writes on personal finance issues for some of Australia's largest financial institutions. She is the author of Investing in Your Child's Future and Baby or Bust, and has collaborated with Paul Clitheroe on a variety of projects including radio scripts, newspaper columns, and several books.