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Many Australians have life cover through super - some without even knowing. But is it enough? Is it costing more than it should? Should you stick with default cover or look for something better?
In this guide, we'll help you understand:
- What insurance in super actually means
- The pros and cons of default vs retail super insurance
- The impact of occupation definitions on claims
- How to pay premiums using your super balance
- How to decide what's right for you
Definition
What Is Insurance in Superannuation?
Insurance in superannuation refers to life insurance policies funded through your super account. It's a common way for Australians to fund:
- Life cover
- Total and Permanent Disability (TPD)
- Income Protection
Using your super to fund insurance can ease the strain on your cashflow and deliver tax advantages. But it's not always straightforward…
Default cover
Built-In (Default) Insurance in Super
Most larger super funds, including Industry funds, have a default insurance offering typically including Death and Total and Permanent Disability (TPD) cover, and sometimes Income Protection. You usually get this automatically if:
- You're 25 years or older
- Your super balance exceeds $6,000
- You haven't previously opted out
Pros
- No medicals or applications needed
- Low cost due to group negotiated pricing
- Convenient and automatic
- Premiums deducted from super, so there is no cashflow impact
Cons
- Cover can be basic, with limited features
- Cover might not match your needs - often the default amounts are low and they may not cover your mortgage or other financial demands.
- Cover can be cancelled due to inactivity or low balance
- Claims must meet fund conditions of release
- Trustees can have a say where your death benefits are paid unless you hve a binding nomination, and these expire every three years.
- TPD and Income benefits are based on an any occupation definition read more below
- Reduces your retirement savings over time. Even though default cover is generally cost effective the cumulative effect over a lifetime can add up.
Definitions
Why “Own Occupation” Definitions Aren't Available Inside Super
Superannuation law restricts the sort of benefits that can be paid from a super fund, with each benefit required to meet "conditions of release" in order to be paid. When it comes to Total and Permanent Disability (TPD) or Income Protection inside super, the "conditions of release" mean you're usually restricted to the “any occupation” definition. This means you can only claim if you're permanently unable to work in any job you're reasonably qualified for - not just your own.
In contrast, “own occupation” cover allows a claim if you're unable to return to your specific role - even if you could do something else. But here's the catch:
Superannuation rules only offer benefit payments for TPD and Income Protection with an “any occupation” definition. “Own occupation” definitions cannot be used within super on their own.
A retail policy with an “own occupation” definition can offer significantly better protection allowing people to claim in more situations.
This is also why Trauma (Critical Illness) insurance isn't available within super - it doesn't meet the conditions of release at all.
Want both flexibility and compliance? Check out the Superlink Strategy - it can combine both inside and outside super to solve this.
What to know
What You May NOT Know About Default Super Insurance
Your Cover Can Expire
If your account becomes inactive, meaning you haven't made a contribution for 16 months, insurance may be cancelled automatically. This can also happen if your balance drops too low.
- Ensure regular contributions continue
- Actively opt in, if that is available
Your Cover Amount Can Change Over Time
Default cover is often variable, it can increase and decrease with age. So, the amount you think you're covered for might not be the amount you'd actually get in the event of a claim.
Example (Aug 2025): Australian Super default life cover starts at $50,000 at age 18, peaks at $183,000 between ages 32-34, then drops to $9,000 by age 59.
Source: Australian Super Insurance Guide
You Can Top Up Your Cover - But You'll Be Underwritten
If you apply to increase your cover, most funds require you to go through underwriting:
- Health and lifestyle questionnaires
- Possible exclusions, loadings, or declined cover
- Even if your fund allows you to apply for increases, it could be worth doing a price comparison with more than one insurer as premiums can vary significantly between providers - see below.
Retail cover
Retail Insurance Inside Super
Retail insurance, meaning insurance usually sold by financial advisers (or directly through us!) and fully underwritten, can often be paid for through a super account. This can offer greater flexibility and more advanced features. Unlike default insurance, there are broader options for tailored benefits and retail insurance offers a higher level of protection.
How it works in practice:
- Premiums are paid into an insurance-only “fund,” which doesn't replace your main super fund
- This fund won't replace your existing fund and is used solely to pay for insurance premiums
Payment Options
- Rollover: Transfer from your main super (may qualify for 15% tax rebate). No immediate cashflow impact, but reduces your super balance.
- Contribution: Pre-tax concessional contributions (up to $30,000 pa.). This does have an immediate cashflow impact.
Advantages
- Broader features and higher coverage limits
- Tax benefits through super funding therefore premiums are usually lower
- Greater control and flexibility
Considerations
- Can erode your super balance
- Claims still subject to superannuation release rules
Superlink
The Superlink Strategy - Best of Both Worlds
Superlink splits your coverage:
- Inside super: Basic, tax-efficient base cover funded via super or contributions
- Outside super: Enhanced definitions and claim certainty paid from your own pocket
In a claim, the super portion is assessed first. If the claim isn't approved under super rules, the external policy can step in.
Why it matters: Super-based TPD typically uses “any occupation” definitions - meaning you need to show you're unable to work in any occupation for which you are reasonably suited by training, education or experience. With Superlink, an external policy can use the stronger “own occupation” definition which offers better protection, especially for specialists.
Costs
Comparing Costs - Built-in vs Retail Cover
Default cover is often cheaper but limited. With retail policies, you can tailor your cover and often access more generous definitions and benefits
At Keep Insurance Co, we make it easy to see what a retail policy could cost you:
- Income Protection rates per $1,000 of monthly benefit
- Lump sum premiums per $100,000 of coverage
See current retail insurance pricing
Learn more about the differences between Super, Retail and Direct Life Insurance
Frequently Asked Questions
What does insurance in super actually mean?
It's a way of paying for life insurance (and often TPD and sometimes income protection) through your superannuation balance.
Can I cancel default insurance in super?
Yes - but if you want to reinstate cover later you may have to go through underwriting.
Will my default super insurance change over time?
It depends on your fund offering. Many funds have cover that varies by age - increasing until your 30s but then dropping as you approach retirement
What does 'any occupation' vs 'own occupation' mean?
“Any occupation” only pays if you can't work at all. “Own occupation” pays if you can't return to your specific job - available only in retail or Superlink setups.
Is income protection automatically included in default cover?
Not always. Many funds require you to opt in or may not offer it at all.
What are the pros and cons of default vs retail super insurance?
Retail: more features, tailored, flexible. Cons - more expensive, requires underwriting.
Default: cost-effective, automatic, but limited and can reduce your super.
What does any occupation mean in super TPD and Income Protection insurance?
TPD and Income Protection cover in super is assessed on an “any occupation” basis - you must prove you're unable to work in any job you're reasonably suited for by training or experience.
How do I pay premiums using my super balance?
Default premiums are auto-deducted. Retail super cover can be funded by rollover or concessional contributions.
What does default cover in super actually cover?
Always life cover, sometimes linked TPD (any occupation), and occasionally income protection. Amounts can vary with age.
What is automatic cover in super insurance?
If you are over 25 and have more than 6k in your super balance you may be eligible for automatic insurance cover in your super fund.
What are the eligibility requirements for default super insurance cover?
In order to qualify for default insurance cover in your super you must be over 25 and have more than $6k in your super balance. However, some funds will allow you to request to opt in outside those limits - check your super insurance guide to see details.
Can I opt-out of super default insurance?
You can usually opt out of default cover in your super however, if you want to opt back in you will generally be subject to underwriting.
Can you increase default super insurance cover?
Yes, in some funds it can be it's possible to increase your cover either by units or to a fixed amount, however you will generally have to go through some underwriting.
Will stopping contributions with my super cover be cancelled?
Yes, if our balance drops below a certain threshold or you account is deemed inactive (16 months without contributions).