Super insurance premiums are rising - what you can do

Insurance held through super has long been considered a cost-effective way to protect your income and retirement savings. But premiums are starting to rise as one particular type of claim surges.

Australia's biggest super fund, AustralianSuper, has warned members to expect higher insurance premiums.

Inflation-weary Aussies may shrug this off as just another price hike.

But the size of AustralianSuper's premium uptick may take members by surprise.

From May 30, life cover premiums will jump 20%, while premiums for total and permanent disability (TPD) cover will surge 40%.

Premiums for optional types of cover, such as income protection insurance, will climb by up to 38%.

AustralianSuper isn't the only fund to lift premiums. CareSuper flagged an uptick in premiums from April 2026.

This matters because AustralianSuper is a goliath of the industry.

It manages over $410 billion worth of retirement savings on behalf of over 3.6 million Australians. And although only around half these members have cover through the fund, the sheer scale of AustralianSuper would give it serious clout when it comes to negotiating a good deal with insurers.

So, why the premium hikes?

Why insurance premiums through super are on the rise

By way of background, super funds organise 'group' cover for members - think of it as buying in bulk - through third party insurance companies. AustralianSuper, for instance, partners with TAL for its member cover.

Part of the appeal of group insurance is that it's both affordable and automatic - there's no need for medical examinations.

That said, super funds are well within their rights to pass any premium hikes on to fund members.

Christine Cupitt, CEO of the Council of Australian Life Insurers (CALI), says, "Australia is reaching a tipping point. The entire safety net, not just life insurance, is under pressure."

Data from CALI shows mental health is now the leading cause of TPD claims, accounting for almost one in three claims paid.

Of particular concern, mental health-related TPD claims among Australians aged in their 30s have increased 732% over the past decade.

Mental ill health is also driving one in five income protection claims, with payouts totalling $887 million in 2024.

The rise in mental-health claims is deeply concerning, especially as almost one in two Australians may experience mental ill-health in their lifetime.

In terms of insurance, this raises the possibility of higher premiums across other funds.

In March, insurance giant Zurich announced it would increase TPD premiums in response to "an increase in the volume and complexity of claims, especially those related to mental health."

Save on premiums without scrimping on cover

On the plus side, the increase is relatively small in weekly dollar terms. Over time, however, even small increases can erode retirement balances.

The increase ranges from an extra 13 cents a week (TPD plus life cover combined) for a 20-year-old professional, through to an additional $7.72 weekly for a 60-year-old blue collar worker.

Still, every cent paid in premiums is money we don't have in retirement.

What can fund members do? Plenty. Here are a few options to protect your super savings and still have adequate cover in place:

Know if you have cover

More than one in four Australians do not know what insurance they hold through their super, according to Super Consumers Australia.

So, the first step is to log into your super account, and check the policies you've signed up for (if any) - and how much cover you have.

You may not have cover at all.

Super funds are required to cancel insurance on accounts that had been inactive for 16 months. Also, default insurance no longer applies for members aged under 25 or for account balances below $6,000.

Check your work rating

A 'work rating' helps your super fund classify your job into one of several risk-based categories, chiefly:

• Blue collar
• White collar, and 
• Professional.

Some funds drill deeper into occupations, and may include 'light blue collar' workers like flight attendants and hairdressers.

The main point is that higher risk jobs attract higher insurance premiums.

If your job is incorrectly classified, a quick call to the fund can sort this, and potentially see you save on premiums.

Rethink multiple super accounts

If you have more than one super fund - as four million Australians do - you could be doubling up on premiums.

This will eat into your super savings, and you may be paying for cover you can't claim. With income protection insurance, for example, the most you can usually claim is 75% of your income prior to falling ill even if you have multiple policies.

Consolidating all your super into a single account can see you save on insurance and fees. However, the picture can change if you have a pre-existing medical condition.

Super Consumers Australia warns that funds may impose exclusions or waiting periods for pre-existing conditions. Worst case scenario, a claim could be denied if you change funds.  The only way to know is to read a fund's product disclosure statement (PDS).

Consider insurance outside of super

Insurance through super tends to be cost-effective because it is purchased in bulk.

In addition, premiums are paid from contributions taxed at just 15% rather than after-tax income, which can be taxed at far higher rates.

The downside is that cover is not tailored to your needs.

To know if your level of cover meets your needs, jump onto the Moneysmart life insurance calculator (or your fund's equivalent).  You can always request an increase in insurance though this will mean an uptick in premiums.

Alternatively, it's possible to arrange insurance outside of super. This can especially apply to income protection insurance, which is not always available as a default option through super.  The added sweetener is that premiums on income insurance are usually tax deductible, when you pay for cover from your own pocket.

The bottom line

The ability of super funds to bulk buy insurance means members generally get a good deal on the cost of cover, even at a time when premiums are rising.

It is possible to compare premiums charged by different funds but it means poring over the fine print of PDS documents.

The more pressing issue may be knowing whether you actually have cover in place - and if it's the right amount for your needs. Hopefully you'll never have to rely on it, but if you do, the payout from insurance held in super can be a financial lifeline when the cover is set up correctly.

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