Almost half of industry super fund members are underinsured according to research from the Australian Institute of Superannuation Trustees & Industry Funds Forum . Don’t be another statistic – make sure you’re covered.

If you’re like most Australians, your only insurance cover is through your super. While this can be a convenient way to buy your insurance, it may not adequately cover your needs and could be undermining your long-term financial plans.


Most superannuation funds offer a basic level of life and personal insurance cover, and paying your premiums out of your super fund can have benefits.

For example, for insurance outside of superannuation, you typically pay premiums from after-tax earnings, but within superannuation they may effectively be paid from your pre-tax employer contributions (which is also less disruptive to your cash flow).

Most large funds may also offer lower premiums as they have a larger pool of people with life insurance. Plus, many funds have automatic acceptance for basic levels of cover, with no need for medical questionnaires or examinations.

However, purchasing insurance within super may have drawbacks.

Proceeds of Claims

With a life insurance policy outside superannuation, death claims are usually paid relatively quickly. But depending on the superannuation fund, the process could be longer as the trustee may decide how, and to whom, a benefit is paid.

While proceeds of personal life policies and total and permanent disability (TPD) policies outside superannuation are generally paid tax-free to beneficiaries, within a super fund these insurance benefits usually become part of the member’s account balance and recipients may be liable for tax depending on how, and to whom, the benefits are paid.

Eroding Superannuation Balance

Super insurance can also erode your superannuation retirement savings. If you are using your superannuation to pay insurance premiums, you may have less money to invest for your retirement.
Many of us feel we don’t need to worry about insurance – our super fund looks after it. But AIST and IFF research shows that almost half of industry super fund members are underinsured by $100,000 for life cover and by $1,000 per month for income protection cover.

What does it cover?

Many Australians would be surprised to learn how small an amount their super insurance actually covers. The average life insurance amount payable from superannuation is only around $70,000, according to Rice Walker Actuaries research.  Also, your level of life and income protection insurance in superannuation may not be enough to cover all your financial obligations for an extended period of time. There may even be mandatory waiting periods before payments start.

Finally, it’s worth keeping in mind that experiencing an illness or injury that limits your capacity to work is surprisingly common. There’s a one-in-three chance that you’ll be off work for three months or more before you reach the age of 65.  The question is, will your super insurance cover you?

We can help!

Getting professional financial advice can help ensure you find the correct Insurance cover to meet your needs. Please CONTACT US for an obligation free meeting.

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Disclaimer: This editorial and the information within, including tax, does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser. The views expressed in this publication are solely those of the author; they are not reflective or indicative of Licensee’s position, and are not to be attributed to the Licensee. They cannot be reproduced in any form without the express written consent of the author. RI Advice Group Pty Limited ABN 23 001 774 125, AFSL 238429.