Insurance in super: how it works

Everyone's insurance needs are different, so it can be important to choose cover based on your individual circumstances.

Most super funds offer three main types of insurance.

The three types of insurance available through super generally include life insurance, total and permanent disability (TPD) insurance, and income protection insurance for members.

But there’s more to consider when making decisions about personal insurance. These may include whether you’ve got enough cover, the right types of cover, or deciding whether to hold insurance inside and outside super.

As life changes, so could the insurance cover people need, which means insurance may not be a set-and-forget option.

When choosing insurance, it can be important to remember to compare details such as costs, what is and isn’t covered, and any waiting periods.

Insurance through super

Insurance within super can be an important part of your overall financial picture.

QSuper account holders have access to various insurance options, all designed with the aim to provide security and peace of mind throughout their life.

ASIC’s MoneySmart website¹ says insurance through super is often cheaper, as the fund buys insurance policies in bulk. It can also be easier to pay as premiums can be automatically deducted from a member’s super balance rather than their take home pay.

However, TPD insurance cover in super usually ends at age 65 and life cover usually ends at age 70. This is in contrast to insurance outside of super where cover generally continues as long as a person pays the premiums.

There are also some circumstances where cover may be cancelled for QSuper account holders, such as if a contribution has not made for 13 months or more, unless the super account holder permanently opts in to the insurance cover.

With QSuper, if you're a new account holder aged under 25, insurance will not be provided unless you:

• write to us to request insurance through your super
• work in a dangerous job (you can cancel this cover if you don't want it).

The types of insurance through super

Death cover is designed to provide your family, or any nominated beneficiaries with a lump sum of money or a regular income stream if you die. Additionally, if you are diagnosed with a terminal illness, you may be able to receive your death benefit as a terminal illness benefit.

Income Protection insurance can help maintain the lifestyle you've built for yourself and your loved ones by paying you a weekly benefit if you are unable to work due to serious illness or injury.

TPD insurance pays you a lump sum if you are unable to work again due to illness or injury. This allows you to take care of yourself and your loved ones, as well as cover any ongoing medical costs.

There are other types of insurance outside super. These may include trauma insurance and private health insurance.

What does an insurance policy cover?

MoneySmart recommends always asking what’s included and excluded in a policy.

If you are considering buying, renewing or switching insurance, it can be wise to check if the policy will cover you for claims associated with COVID-19 as well as the key features, fees, commissions, benefits, risks and the complaints handling procedure for any policy that are detailed in the product disclosure statement.

When checking what a policy covers, you may specifically want to ask:

• what is and isn’t covered, including definitions of medical conditions and pre-existing conditions
• the length of the waiting period
• ongoing costs of the cover, such as whether the premiums will increase, and when.

How much insurance do you need?

How much cover you need will depend on your individual circumstances.

Needs may be calculated by how much money would be lost if something happened and you lost your earning power. This may include savings, paid leave, shares, or superannuation. These amounts may be taken into account in determining how much you would then need in insurance.

The QSuper Insurance Needs Calculator may help you determine how much insurance is right for you.

How you can make your insurance right for your circumstances

You can change your insurance that you hold in super to meet your personalised needs, although it is important to note that tailoring your insurance may change the premiums that you pay.

Reviewing your cover regularly may ensure you have the right insurance cover for your circumstances. As soon as your circumstances change, you may like to consider how this may impact your level of cover as it may need adjusting.

Learn more

You can find out what insurance cover you have and can easily personalise your insurance cover by logging into Member Online.

1. Australian Securities and Investments Commission, MoneySmart: Insurance through super, accessed 19 September 2022 at www.moneysmart.gov.au