Is super life insurance worth having?

April 6, 2021

Is life insurance through your super fund worth having? For many Australians, opting for the default life insurance offered by your super fund has always been a no brainer. No phone calls or medical checks, tick the box and you’re done. However, Australian Prudential Regulation Authority (APRA) has been noticing some new trends of concern regarding costs—concerns that will make you question if super life insurance is worth having.

An in depth analysis of trends discovered between 2012 and 2016 after a period of premium reductions, insurers were losing out, so to counteract these losses they increased premiums and tightened up the level of cover.

It is estimated that three quarters of Australians have their life insurance through super funds. It is the easy option with it being quick and easy to set up, lower premiums and generally no health checks required. When you opt for insurance through your super fund, most funds offer life insurance, income protection and total and permanent disability (TPD).

What does your super life insurance cover you for?

Depending on your super account, you might get to select which cover you want, or you can have access to all three. In the event of your death or illness preventing you from work, life cover will provide your nominated beneficiaries a regular income or pay out a lump sum. If you are injured or disabled and are unable to work, this is covered by TPD. Income protection covers you if you are injured or sick for a finite period.

Your insurance premiums automatically get deducted from your super balance, so rather than set and forget—in  lieu of the new trends highlighted by APRA—you would be well advised to compare your super life insurance premiums to what you would be paying if you organised it.

APRA has analysed data gathered on super life insurance claims, the number of disputes and the amount of premiums, all of which have risen since the global pandemic. 

APRA deputy chair, Helen Rowell, wrote in a letter to life insurers and superannuation funds in which she said, “For most people, the life insurance they receive through their super fund is the only cover they have to protect themselves and their family. It’s critical that these issues are addressed so sustainable and affordable insurance is available to members through their superannuation fund over the medium to long-term.” 

APRA suggested super members could be disadvantaged if rises in insurance premiums and the tightening of terms and conditions were to continue. So much so that it could even affect the ongoing viability of having life insurance through super funds.

We strongly advise that you pay attention to your super life insurance premiums to make sure your funds aren’t being whittled away by rising premiums. Most super funds will give you the option to adjust your insurance coverage to suit your current circumstances.

In the interim, APRA is keeping a close eye on the current situation to ensure that Registrable Superannuation Entities (RSE) undertake the necessary measures to protect their super members and continue to offer value and benefits and are transparent about the risks and what you’re covered for.

Is your super life insurance worth having?

Take the time to research and compare your super premiums to what is offered on the market. If you're unhappy with the type of cover and the premium prices, you can opt to get extra cover from a different insurance provider. It’s also important to know that you may not be covered if you stop contributing to the fund between jobs or if your super fund becomes inactive.


Do you know what you’re covered for?

Whether you’re not sure what your super fund covers you for, how much you’re paying for premiums or if there is a better deal available, we can help you get the best value for your money. Also, be aware if you’ve accrued several super funds by changing employers and opting for their chosen super provider, you could be paying multiple premiums. Let us assist you by making sure you’ve got life insurance cover and your super funds consolidated so that you can live a comfortable retirement and in the event of injury, sickness or death, your loved ones are looked after.


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