Life insurance through super
Life insurance through super is cover your super fund provides, usually life (death) cover and TPD, with premiums paid from your super balance instead of your take-home pay. Most funds give it automatically to members aged 25 and over, some add income protection, and you usually get the default amount without any medical checks.
That makes it a useful base, but it is rarely the whole answer. Default amounts are often well below what a household with a mortgage and children would need, cover can switch off if your account goes quiet, and every premium reduces what you retire with. The job is to check what you have, then decide whether to keep it, top it up or replace it.
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General advice only. It doesn't consider your circumstances. Read the PDS and TMD before you decide.
What cover a super fund can give you
Moneysmart describes three types offered by most funds other than self-managed funds: life cover (also called death cover), which pays a lump sum or income stream to your beneficiaries when you die or are terminally ill; TPD insurance, which pays if you become seriously disabled and unlikely to work again; and income protection (sometimes called salary continuance), which pays a regular income for a set time.
Super can't hold every kind of cover. Since 1 July 2014, new insurance in super must match a condition of release: death, a terminal medical condition, permanent incapacity or temporary incapacity. That rules out new trauma cover and own-occupation TPD inside super. Moneysmart adds that TPD cover in super usually ends at 65 and life cover at 70.
The rules that switch default cover on and off
Two sets of reforms decide whether you have default cover at all. Both aim to stop premiums eating the balances of people who may not need the cover, so you may need to act to keep it.
| Rule | In force from | What it does | How to keep or get cover |
|---|---|---|---|
| Inactive accounts (Protecting Your Super) | 1 July 2019 | Funds must cancel insurance on accounts with no contributions for at least 16 months | Tell the fund you want to keep it, or add money to the account. The fund must contact you before cover ends |
| Members under 25 (Putting Members' Interests First) | 1 April 2020 | Cover doesn't start automatically for new members under 25 | Ask the fund to opt you in |
| Low balances (Putting Members' Interests First) | 1 April 2020 | Cover doesn't start automatically while your balance is under $6,000 | Ask the fund to opt you in. If your balance later falls below $6,000, you usually keep existing cover |
| Dangerous occupations | 1 April 2020 | Funds may still give automatic cover to members in dangerous jobs | You can cancel it if you don't want it |
Default cover in seven large super funds
Default cover isn't the same everywhere. Some funds include income protection and others don't, one doesn't include TPD at all, and the age at which cover ends ranges from 65 to 75. The table compares what seven large funds give a new member by default, from each fund's current insurance guide.
The amount usually depends on your age, and in some funds your occupation, so check your own statement or online account for the figure that applies to you.
| Fund | Default cover for new members | When it ends | Default income protection? |
|---|---|---|---|
| AustralianSuper | Age-based death, TPD and income protection (basic cover) | Death at 70; TPD at 65 | Yes |
| Australian Retirement Trust (Super Savings) | Age-based death cover and TPD Assist, which provides rehabilitation and support payments and in some cases a lump sum | Death at 70; TPD Assist at 67 | No, you can opt in |
| Aware Super | Age-based death and TPD (Basic Cover), automatic if you joined through your employer | Death and TPD at 70; fixed TPD reduces from age 61 | No, you apply |
| Hostplus | Age-based death and TPD | 70 | No, you apply |
| Rest | Age-based death, TPD and income protection (Default cover) | Death and TPD at 70 | Yes |
| HESTA | 2 units of death cover and 2 units of income protection; TPD only if you apply | Death cover reduces to nil at 75 | Yes, 2 units |
| Cbus | Units of death and TPD set by occupation category; Manual is the default, with 4 units each from age 21 to 64 | TPD at 65 unless you extend it; all cover at 70 | No, you apply |
How to increase, reduce or cancel cover in super
You can usually change your cover online, by phone or with a form from your fund. Reducing or cancelling takes effect quickly and needs no health questions. Increasing it, or getting cover back after cancelling it, usually means answering health questions and possibly medical checks, so think before you cancel.
If you're under 25 or your balance is under $6,000, ask the fund to opt you in. If you've stopped contributing, tell the fund you want to keep your cover, because by law it must cancel insurance on an account with no contributions for 16 months unless you've elected to keep it. Before you roll over or close an account, check what cover you'd lose, and whether the new fund will give you the same amount.
Pros and cons of life insurance in super
Moneysmart sets out the trade-off plainly. The advantages are real, and so are the gaps.
| Advantages | Disadvantages |
|---|---|
| Can be cheaper, because funds buy cover in bulk | Default amounts may be lower than you need, and eligibility rules apply |
| Premiums come from super, not your take-home pay | Premiums reduce your retirement savings, which matters more close to retirement |
| Default cover usually needs no medical checks, which helps people in high-risk jobs or with health conditions | Cover can end if the account is inactive, the balance runs out, you change fund or you reach an age limit |
| You can usually apply to increase cover | Increases usually need health questions and possibly medical checks |
| Can be tax-effective for some people | No own-occupation TPD or trauma cover, and the trustee decides who gets death benefits without a binding nomination |
Who receives the money
Insurance paid on your death goes into your super account and is paid out as a super death benefit, alongside your balance. With a valid binding nomination, the trustee pays the people you named. With a non-binding nomination or none at all, the trustee decides which dependants to pay, or pays your estate for distribution under your will.
Superannuation law limits who can receive the money directly: your spouse or de facto partner, your children of any age, and anyone in an interdependency relationship with you. To leave it to someone else, you nominate your legal personal representative so it passes through your will.
The money can take time to arrive: Moneysmart notes your family usually needs to lodge a death benefit claim with the fund first, so they may have to pay funeral costs upfront and be repaid later.
How a death benefit from super is taxed
The tax depends on whether the person receiving it is your dependant under tax law, which is a narrower group than under super law. Spouses, former spouses, children under 18, people in an interdependency relationship and anyone financially dependent on you count. An adult child who wasn't financially dependent on you does not.
A lump sum paid to a tax dependant is tax-free. A lump sum paid to a non-dependant has its tax-free component untaxed, but its taxable component is taxed at up to 15% plus the Medicare levy on the taxed element and up to 30% plus the Medicare levy on the untaxed element. Insurance proceeds paid through super can increase the untaxed element, which is why a large life insurance payout through super can lose a noticeable share to tax when it goes to adult children. A policy held outside super and paid directly to a nominated beneficiary doesn't go through these super rules.
A TPD payout from super is taxed differently again, because it's paid to you rather than your beneficiaries: under 60, its taxable component is taxed at up to 22% after a tax-free uplift. The TPD payout calculator shows what you'd receive, and life insurance in Australia compares cover inside and outside super.
How to check the cover you have
Log in to your fund's website or app, or check your annual statement and the fund's insurance guide or PDS. You're looking for five things.
- The type of cover: life, TPD, income protection, or a combination.
- The amount, and whether it is a fixed sum or reduces with age (many default scales fall as you get older).
- The premium you are paying each year, and whether you are paying a loading for occupation or smoker status. If you have been classified wrongly, ask the fund to fix it.
- When the cover ends, and what would cancel it early.
- Whether you hold cover in more than one fund. Duplicate cover costs twice, and you may not be able to claim the full amount from both.
General advice only. This information doesn't take into account your objectives, financial situation or needs. Consider whether the product is right for you and read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) before you decide. We don't compare every product in the market, and we may earn a commission if you take up a product through our links.
What to watch for
- Check your insurance before you roll over or close an account. Consolidating super can cancel cover in the fund you leave.
- If you are moving into a new job and are under 25 or have a small balance, you may have no cover at all until you opt in.
- Make a binding death benefit nomination if you want certainty about who receives the payout, and renew it if your fund's nominations lapse.
- Compare the cost of topping up in super against a retail policy. Super is often cheaper for any-occupation cover but can't offer own-occupation TPD or trauma.
Common questions
Is it wise to pay life insurance through your super?
It can be. Premiums may be cheaper, they don't come from your take-home pay, and default cover usually needs no medical checks. The trade-offs are that premiums reduce your retirement savings, default amounts are often too low, and cover can end if the account goes inactive.
Does superannuation offer life insurance?
Most super funds, apart from self-managed funds, automatically give members aged 25 and over life cover and TPD insurance once their balance reaches $6,000, and some add income protection. Members under 25 or with smaller balances must opt in.
How do I know if I have life insurance in my super?
Log in to your fund's website or app, or check your annual statement. It will show the type of cover, the amount, the premium and when the cover ends. You can also call the fund.
What happens to my life insurance in super if I stop working?
Cover generally continues while premiums can be paid from your balance, but by law the fund must cancel it if the account receives no contributions for 16 months, unless you tell the fund you want to keep it. Check whether your fund has its own balance rules too.
Are life insurance payouts from super taxed?
A lump sum paid to a dependant under tax law, such as a spouse or a child under 18, is tax-free. A lump sum paid to a non-dependant, such as an independent adult child, has its taxable component taxed at up to 15% or 30% plus the Medicare levy.
Should a 65-year-old have life insurance?
Only if someone still depends on your income or would be left with debts. Moneysmart says life cover in super usually ends at 70 and TPD cover usually ends at 65, so check what you still hold. If your super and savings would cover what your family needs, you may need little or no cover. See life insurance for over 60s.
Which insurance denies the most claims?
By cover type, TPD. APRA's figures for the 12 months to 31 December 2025 show group cover in super admitted 98.1% of death claims, 96.1% of income protection claims and 90.2% of TPD claims, and TPD had the lowest admittance of the main covers in every channel. Moneysmart's life insurance claims comparison tool shows each insurer's rates.
General information only
Super funds set their own default cover scales, age limits and occupation ratings within these rules. Your fund's insurance guide is the final word on your cover, and a registered tax agent or financial adviser can help with death benefit planning.
Protecting your income as well
Life, TPD and trauma cover pay lump sums. Income protection is the cover that pays a monthly income while you recover.