Insurance through super

Three kinds of cover

• Life cover

  Also called death cover, it pays a benefit to your beneficiaries when you die or have a terminal illness.

• TPD

  Total and permanent disability insurance pays a benefit if you become seriously disabled and are unlikely to work again.

• Income protection

  Also called salary continuance cover, it pays a regular income for a set time, such as 2 years, 5 years or up to a certain age, if illness or injury stops you working.

Super funds no longer offer new trauma insurance policies, but someone who was in a fund offering it before July 2014 might still have it through their super.

When cover starts and when it ends

Moneysmart describes these points in the life of the cover on a super account. Insurance terms and conditions vary from fund to fund.

1. A new member under 25, or a balance under $6,000Insurance through super does not start automatically, unless, among the cases Moneysmart lists, you contact your fund and ask for it. If you already have cover and your balance falls below $6,000, you usually keep it.
2. Aged 25 or overMost funds automatically give life cover and TPD insurance, and some also give income protection. This default cover can often be had without medical checks.
3. No contributions for 16 monthsBy law, super funds cancel insurance on an account that has received no contributions for 16 months or more, and some funds have their own rules to cancel it when a balance is too low. The fund contacts you before the cover ends; to keep it, you tell the fund or add money to that account. The rule is section 68AAA of the Superannuation Industry (Supervision) Act 1993: it binds each trustee, lets a member elect in writing to keep the cover, and does not apply to some members, among them defined benefit members and members covered by the employer-sponsor contribution exception in section 68AAE. Under section 68AAD, it also does not apply to funds with no more than 6 members.
4. Age 65TPD cover in super usually ends.
5. Age 70Life cover in super usually ends. Bought outside super, TPD still usually ends at 65, but life cover may continue for as long as the premiums are paid.

What the cover costs the account

You can choose whether to have insurance through super. Its cost depends on things such as the type of cover, how much you are insured for, your age and your occupation. The cost and type of cover also vary between funds.

When cover sits inside super, the premiums are generally taken from the super balance, which reduces retirement savings over time. Moneysmart sets the two sides against each other: default cover through super can be cheaper and easier than buying it directly, but it might not match your needs. Someone with several super accounts may be paying for several insurance policies.

Changing funds, jobs or work

Changing funds or closing an account

Moneysmart says to check your insurance before changing funds or closing an account, because someone over 60 or with a pre-existing medical condition may not be able to get the cover they want. When you change funds, your existing cover usually continues until the new fund has issued the replacement policy and confirmed the new cover. Keeping one account lists the ATO’s other checks before a transfer.

Changing jobs

If you stay with the same fund as you move between jobs, your insurance usually stays with that fund, though a stapled fund’s cover might not suit the new job or your situation.

Becoming self-employed

Moving from employee to self-employed may affect the insurance through your super, and insurance terms and conditions vary from fund to fund.

Claims and complaints

Someone unhappy with how a claim was handled, or with the decision, can complain about it to the insurer or the super fund, and Moneysmart says to do so as soon as you can.

Beyond the fund and the insurer, Moneysmart names the Australian Financial Complaints Authority (AFCA) as an independent dispute resolution scheme for disputes with financial firms. Who receives life cover paid out on a member’s death is the subject of Who gets your super.