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Life Insurance through your Super Fund

If you have a superannuation fund, there’s a high chance you already have Life Insurance. That’s because your super fund manager usually has to include it. In fact, statistics show that 83% of Australians with a super fund have accepted the default cover provided by their fund.

The Life Insurance included in your super fund comes in three forms:

  1. Life Cover
  2. Total and Permanent Disability Insurance (TPD)
  3. Income Protection

If you make a claim and it’s approved, you’ll usually receive a lump sum payout.

How does Life Insurance work through your Super Fund?

It’s simple. You’ll pay your Life Insurance premiums using the money accumulated in your super. Even better, those premium payments are generally tax deductible.

Getting Life Insurance through your super fund is usually more affordable than a stand-alone policy. If your employer has organised the fund, you may get a group discount. But this usually only applies to the minimum standard of cover and may not meet you or your family’s needs.

Life Cover

In the unfortunate event of the policyholder’s death or terminal illness (with a prognosis of no more than 12 months left to live), their family or beneficiaries will receive a lump sum payment.

Significant tax benefits apply when you take out general Life Insurance through your super fund, because premiums are tax deductible. This applies to all three types of Life Insurance cover.

Total and Permanent Disability Insurance (TPD)

If you became permanently disabled and were unable to work again, TPD would provide a lump sum payment to cover the cost of rehabilitation, settle current debts and support the cost of living for you and your dependant.

Income Protection Insurance

Your superannuation fund may also provide you with Income Protection if you were unable to work due to serious injury or illness. Income Protection insurance will provide you with up to 75% of your regular income for a period of time until your payments expire or you’re able to work again.

As with general Life Insurance and TPD, Income Protection premiums paid through your super fund are tax deductible. If you made a claim and were provided with Income Protection, the payments made to you would be taxable.

Find out more about Income Protection insurance through your super fund.

Benefits and disadvantages of buying insurance through super

Benefits Disadvantages
It is cheaper since policies are bought in bulk The levels of cover can be limited
You can pay your premiums even if money is tight Tax may be payable to some benefits
It’s easy to manage since premiums are automatically deducted If you don’t nominate a beneficiary, your super fund decides who gets your payout in the event of your death
You’re unlikely to need a health check There can be delays in the payout of your benefits

Choosing a policy

If you’re unsure how Life Insurance can be incorporated into your super fund, our Wealth Smart advisors can help. Our knowledge and expertise will help you find a super fund policy to suit you and your family while also providing you with the right amount of cover at the best price.

If you would like to incorporate a Life Insurance policy into your super or want help to increase your level of cover already provided enquire now!

Page last updated: January 23, 2015