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· Posted on
February 21, 2024

What does insurance have to do with super?

The two finance terms that seem the most complicated - superannuation and insurance. Let’s unpack how these two work together.

What's the key learning?

  • Most super funds automatically provide some form of insurance to members
  • Some funds sign you up automatically when you join, but you can always say ‘no thanks’ if you decide the cover they offer isn’t quite right for you.

When you think about insurance you’re probably thinking about travel insurance for a holiday in Europe, car insurance for scratching your car, or private health insurance for visiting the dentist. 

But here’s the thing - if you have a superannuation account, there’s a pretty high chance that you have insurance through your super fund. But it’s often a different type of insurance.

In fact, almost 10 million accounts have super insurance, but a lot of us don’t even realise we’ve got it. Let’s walk through everything you need to know about insurance as part of your superannuation account.

So, why might I have insurance through my super?

Most super funds automatically provide some form of insurance to members. Basically, it’s another way for these funds to make money and it can be a pretty decent insurance option for us members, too. 

Some funds sign you up automatically when you join, but you can always say ‘no thanks’ if you decide the cover they offer isn’t quite right for you.

What types of super insurance do funds tend to offer?

There are a few main types of insurance that most funds offer. And it may sound a little dark, but it’s good to know. You’ve got:

  • Superannuation life insurance - which is paid to beneficiaries if you die or get a terminal illness (I told you it was dark)
  • Superannuation total permanent disability insurance - which is paid if you become seriously disabled and can’t work
  • Superannuation income protection insurance - which covers your income for a predetermined time period, if you can’t work due to injury or illness

How do I know if I have insurance through super?

You can check whether you have insurance through your super fund contacting them. Otherwise you might have noticed premiums being deducted from your super balance.

If you’re under 25 years old or you’ve got less than $6k in your account, you probably won’t have insurance. You also mightn’t have insurance if your account is ‘inactive’ - aka without contributions for 16 months.

Is having insurance through super a good idea?

There are quite a few differences between having insurance as part of your super membership and going with an external insurance provider. Let’s go through the pros and cons…

Pros

  • Your premium may be cheaper because funds buy policies in bulk 
  • You won’t feel the premium payments, because they get taken out of your super
  • Having insurance through super can be tax effective

Cons

  • Your actual super balance will be lower
  • Often insurance through super offers a lower level of cover than external providers
  • Your cover could end if your super account becomes inactive

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