Insurance through super or out of pocket
Life, TPD and income protection cover can generally be paid for from your super. Trauma cover can't. Here's how both ways work, and what to check before you change anything.
- Premiums paid from your super balance, not your take-home pay
- Out-of-pocket cover can include extra options, such as ‘own occupation’ TPD
- You can hold some cover in super and some outside it
You'll be contacted to prepare your quotes.
Which covers can be held in super?
Since 1 July 2014, new cover inside super has to line up with the situations in which super law lets money be released.
How paying through super works
When you hold cover through super, your super fund owns the policy for you and the premiums are deducted from your super balance. If you claim, the insurer pays the trustee, and the trustee releases the money to you, or to your beneficiaries, under super law.
- Premiums don't come out of your take-home pay.
- Premiums do reduce your super balance, and so the amount you'll have at retirement.
- Cover inside super has limits on the types of cover and definitions allowed.
- Some benefits paid from super can be taxed, depending on who receives them and your age.
Through super or out of pocket?
How the two approaches generally compare.
| Through super | Out of pocket | |
|---|---|---|
| Life cover | ||
| TPD cover | ||
| Income protection | ||
| Trauma cover | ||
| ‘Own occupation’ TPD definition | ||
| Premiums come out of your super balance | ||
| Premiums come out of your take-home pay | ||
| Income protection premiums generally tax-deductible to you | ||
| Benefits paid straight to you or your chosen beneficiaries |
General information only. Funds and insurers set their own terms, and tax depends on your circumstances. New TPD cover inside super generally uses an ‘any occupation’ definition. Speak with a registered tax agent about tax.
Default cover in super
Many super funds automatically give members some death and TPD cover, and sometimes income protection. It's called default cover, and its cost is deducted from your balance. A few rules decide whether you have it:
- Inactive accounts. If your account hasn't received a contribution or rollover for 16 months in a row, your fund generally has to stop your cover unless you tell it you want to keep it.
- Under 25s and low balances. New members under 25, and accounts that haven't reached $6,000 since 1 November 2019, generally don't get default cover unless they ask for it. Some exceptions apply, such as some dangerous occupations.
- More than one account. If you have super in more than one fund, you may be paying for insurance in each.
Before you change anything
Cancelling cover, closing a super account or combining accounts can end the insurance attached to that account. Cover that ends may not be available again on the same terms.
What to check in your super
A few minutes with your latest statement tells you what you already hold.
Find your statement
Your fund sends an annual statement, or you can log in to your fund's website or app.
Look for insurance
Find the insurance section. It lists the types of cover you hold and the amounts.
Check the cost
Your statement shows how much has been deducted for insurance over the year.
Check nominations
See whether you have a death benefit nomination, and whether it's binding and current.
Using both: super-linked cover
Some insurers offer cover that's split between super and a policy you own personally. For example, ‘any occupation’ TPD can sit in super while the extra ‘own occupation’ part is held outside super and linked to it. Part of the cost comes from your super and part from your pocket. Insurers call this different things, such as super-linking or flexi-linking.
When you're contacted, ask whether the insurers you're quoted on offer it.
Super insurance FAQs
How does the cost compare through super?
Premiums paid through super are deducted from your super balance, not your take-home pay, and they reduce your retirement savings. Costs, cover limits and terms differ between funds and insurers.
Can I hold trauma cover in super?
No. New trauma cover can't be held inside super (since 1 July 2014), so it's held and paid for outside super.
What happens to my cover if I change jobs?
Cover in super usually stays with your super account, not your employer. If you start a new fund, you may get new default cover there, which can mean paying for cover in two funds.
What happens to my insurance if I combine super accounts?
The cover attached to an account you close usually ends when the account closes. Your fund can tell you what cover each account holds.
Who receives my life cover if it's held in super?
The trustee of your super fund pays it, guided by your death benefit nomination. A binding nomination, where your fund offers it, generally directs the trustee to pay the people you name, as long as the nomination is valid.
Can I pay premiums with extra super contributions?
Yes. Some people make extra contributions to cover the cost of premiums so their balance isn't reduced as much. Contribution caps and tax rules apply, so check with a registered tax agent.
Start the conversation today
It takes about two minutes. You'll be contacted to prepare your quotes. There's no cost to ask, and no obligation to go ahead.
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