Insurance Inside Super Explained

Updated March 2026 · 8 min read

Most Australian super funds include default insurance cover for their members. This cover is funded by deductions from your super balance, which means you may be paying for it without realising. This guide explains what types of insurance are typically included, how the premiums work, and the factors worth considering when deciding whether to keep, adjust, or opt out of your cover.

Types of Default Insurance

Super funds generally offer three types of insurance:

Death Cover (Life Insurance)

Pays a lump sum to your nominated beneficiaries if you pass away. Default cover levels vary by fund but are typically set at 2 to 4 times your annual salary. The payout goes to your super fund first and is then distributed to your beneficiaries, either through a binding nomination or at the trustee's discretion.

Total and Permanent Disability (TPD)

Pays a lump sum if you become totally and permanently disabled and can no longer work. Most default TPD inside super uses an "any occupation" definition, meaning you must be unable to work in any job you are reasonably suited to by education, training, or experience. This is a stricter standard than "own occupation" cover.

Income Protection

Pays a portion of your salary (usually up to 75%) for a defined period if you are temporarily unable to work due to illness or injury. Default income protection inside super typically has a benefit period of 2 years and a waiting period of 30 to 90 days. Some funds offer longer benefit periods as an optional upgrade.

How Premiums Are Deducted

Insurance premiums inside super are deducted directly from your super balance, usually monthly. This means the cost is funded with pre-tax money (since employer contributions are concessional), making it cheaper on a cash-flow basis than paying premiums from your take-home pay. However, every dollar deducted for premiums is a dollar that is no longer invested and compounding for your retirement.

When to Consider Opting Out

Opting out of insurance inside super may be worth considering if you are:

• Young with no dependants, no mortgage, and no significant financial obligations that others rely on.
• Holding duplicate cover across multiple super accounts, paying multiple sets of premiums for overlapping benefits.
• On a low balance where premiums are materially reducing your retirement savings.

When to Consider Increasing Cover

Increasing or maintaining insurance inside super may be important if you:

• Have a mortgage, dependants, or a partner who relies on your income.
• Are the primary earner in your household.
• Want a base level of affordable cover without going through a full underwriting process for an external policy.

Insurance Inside Super vs External Policies

The main advantage of insurance inside super is cost efficiency: premiums are paid with pre-tax money. The main disadvantages are that default cover may not match your actual needs, the "any occupation" TPD definition is harder to claim on, and the claims process goes through the super trustee, which can add time.

External (retail) insurance policies typically offer more flexibility, including "own occupation" TPD, longer income protection benefit periods, and agreed-value income protection. However, premiums are paid with after-tax dollars and policies require medical underwriting.

How to Review Your Insurance Settings

Log in to your super fund member portal or check your latest annual statement. Look for the insurance section, which shows your cover type, cover amount, and the premium being deducted. Compare this against your actual financial obligations. If your circumstances have changed (new mortgage, new child, change of job), your default cover may no longer be appropriate.

General information only, not personal financial advice. Insurance needs vary by individual. Consider your own circumstances or consult a licensed financial adviser before making changes to your insurance cover.