Insurance in super
Life, disability and income protection cover held inside your super fund, paid for from your balance.
Most super funds provide default insurance covering death, total and permanent disability, and sometimes income protection. Premiums are deducted from your balance rather than paid from your bank account.
The advantage is affordability and accessibility. Group policies are cheaper than individual ones, and default cover generally requires no medical underwriting, which matters for anyone with a health history.
The disadvantage is the drag on retirement savings and the fact that default cover is generic. Sums insured are often inadequate for someone with a mortgage and children, and definitions can be stricter than in retail policies.
The cost of duplicate cover
Three old super accounts each charging $400 a year in premiums cost $1,200 annually for cover you can generally only claim once. Consolidating removes the duplication immediately.
The bit people get wrong
Insurance in super stops if your account becomes inactive, typically after sixteen months without contributions. People who change jobs and leave an old fund behind often lose the cover they assume is still in place.
Common questions
Should I keep insurance in my super?
It is a reasonable base layer, particularly because premiums come from super rather than cashflow. Check whether the sum insured actually matches your debts and dependants.
Is income protection better inside or outside super?
Outside super, premiums are generally tax deductible to you personally and policy definitions are often broader. Inside super, premiums do not affect your take-home pay.
Do I have insurance if I am under 25?
Not by default. Cover generally does not start automatically for members under 25 or with balances under $6,000 unless you opt in.