How to opt in to insurance through your super fund


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If you're under 25 and you fall ill, get injured or have an accident, you probably don't have insurance to help you out. Up until October last year, you did have insurance cover through your superannuation fund, but the government's Protecting Your Superannuation measures have switched off automatic insurance for the under 25s.

Why? The under 25s paid around $175 million a year for life insurance cover before it was stopped in 2019. What this means is that the small superannuation balances, averaging $5000 for 20- to 24-year-olds, were being eaten up by insurance costs. Also, young people typically have multiple superannuation accounts that were charging for insurance.

To avoid eroding small balances, automatic insurance cover for anyone under 25 or who has less than $6000 in their superannuation fund was removed.

how to opt in to insurance through super

But if you do have a young family or dependents or you're in a high-risk job, you should consider opting into or activating insurance in your superannuation fund.

It has been argued that young people in high-risk jobs such as building and construction or mining may need to take up life, TPD insurance and income protection insurance. Insurance companies have been paying out claims to the under 25s and there were around 706 death claims, 181 TPD claims and 5,667 income protection claims in the year to June 2016, according to research house Rice Warner.

There are a number of benefits of holding insurance within superannuation, the main one is that it is much cheaper because it comes out of your superannuation money that is taxed at only 15%. Also, a big advantage of holding your insurance within your super is that it is commission-free, unlike private insurance that often involves paying high commissions to insurance advisers.

Importantly the insurance within your superannuation is a simple product and often the funds use their large membership base to negotiate wholesale insurance rates for members.

But understand that life insurance isn't for you but for the people you leave behind and it often goes to mothers with children, explains Rice Warner. TPD insurance will help cover your debts and living costs when you can no longer work. Income protection or salary continuance insurance covers a portion of your living costs when you are too sick or injured to work.

So how do you opt in? You can start with your current superannuation fund, using its online insurance calculator. You plug in your salary, your assets, debts and expenses. The calculator works out how much cover you need and gives you the cost.

But do shop around because there are some big variations in price and cover from fund to fund. You want a superannuation fund that offers high-quality insurance at a low cost. You need to compare the cost as well as the benefits.

But it can be tricky because the underlying terms and conditions can be quite different. One thing to look at is the level of cover for your age. For example, if you died:

  • How much would your family receive?
  • If you were totally and permanently disabled, what cover would you get?
  • If you were too ill to work, what would be your monthly income?

Then see if this cover fits your circumstances.

For most Australians, their super fund offers their only form of financial protection when something goes wrong. Holding your insurance within your superannuation is a unique arrangement compared to in other countries. When compulsory superannuation was introduced in 1992, the industry superannuation funds began to offer insurance as many of their members had none.

Around 71% of Australians' total death benefit sums insured is held in superannuation; 88% of the Australian's entire total and permanent disability insurance and 59% of the total amount of income

It is important for super fund members to understand the terms and conditions of their insurance. If you have dependents, talk to your super fund about what insurance cover you need as well as the terms and conditions.

It is important to seek financial advice about insurance to get it right. Some funds offer free advice over the phone for members who want help with their insurance.

But be aware of the drain of making insurance payments from your retirement benefits. If you pump up your insurance cover, it is coming from your superannuation savings and you may need to contribute more to reach your retirement income needs.

Part-time and casual workers' superannuation savings are eroded by insurance costs, which is why the automatic cover was replaced by an opt-in measure last year.


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Susan has been a finance journalist for more than 30 years, beginning at the Australian Financial Review before moving to the Sydney Morning Herald. She edited a superannuation magazine, Superfunds, for the Association of Superannuation Funds of Australia, and writes regularly on superannuation and managed funds. She's also author of the best-selling book Women and Money.