Many superannuation plans include insurance as part of their offer. It’s often seen as an added benefit that can help in times of need. Insurance paid through super is a tax effective way to protect you and your family should anything happen to you.
You may have decided to take out insurance cover after a conversation with your adviser, or you may have acquired insurance cover as part of a previous employer plan, and when you left that employment you retained your insurance cover.
If you would like to find out more about insurance inside super, you can refer to the Australian Government’s MoneySmart website here for further information.
What is insurance inside super?
Insurance inside super is usually offered through your employer’s super plan as cover they’ve negotiated for you and their other employees. This is called a group insurance policy and is generally considered the number one way for Australians to access affordable insurance without needing underwriting.
How it works
Your insurance premiums get paid out of the money in your super account. This can be good for your budget because the cost doesn’t reduce your take-home pay and super is generally taxed at a lower rate than income tax (so you’re saving there too).
But it also means the balance in your super account will be reduced if you don’t keep making super contributions. This is a good thing to keep in mind if you ever take a long-time off work. But you may not want to be too hasty with cancelling your insurance – it can be hard to get the same insurance at the same price later down the track.
How super rules have changed
In the past, insurance inside super was generally provided automatically to anyone who signed up to their employer’s super plan (this is sometimes called default cover because members don’t need to answer health or lifestyle questions to get covered).
Rules around this changed on 1 April 2020, with updates to super laws. These laws aim to protect certain super accounts from being eroded by the costs of insurance that some people may not want. As a result, to be eligible to receive automatic (default) insurance with your employer super plan, you must now:
- be 25 years old or over,
- have a balance of at least $6,000 in your super account, and
- not have an inactive super account.
- your insurance will be applied automatically (but you’ll be given the chance to tell us if you don’t want it).