Whilst convenient, life insurance through Super has significant limitations that could leave you and your family vulnerable when you need the most protection.
Let’s count them down!
1. Your likely underinsured
75% of Australians are underinsured
According to Rice Warner, around 75% of Australians with life insurance through super are underinsured, holding only about 25% of the cover they actually need.
According to the 2020 report, whilst 94% of working Australians have some form of life insurance,
The good news? You can easily do something about it
Contact your Super fund to find out your level of cover. Generally, you can increase your level of cover through your Super fund’s app or over the phone.
2. You could be paying more than you need to
Your life insurance through Super is through a “group” policy: a blanket policy covering all Super fund members.
And because these “group” policies cover so many people and scenarios, they are far from tailored. Which means that your premiums could be subsidising smokers and older fund members. As KPMG puts it:
“Group insurance is not underwritten at the individual level, which results in higher premiums to offset adverse selection and poorer targeting of benefits.”
KPMG. (2019). Insurance in Superannuation: Achieving better value for members.
ASIC (Moneysmart)
“You may pay more for less cover.”
Productivity Commission
“Members pay for insurance they do not need or that is not in their best interest.”
Choice
“Default cover through Super isn’t always the cheaper or better option.”
KPMG
“Higher loadings t
| ASIC (Moneysmart) | “You may pay more for less cover.” |
| Productivity Commission | “Members pay for insurance they do not need or that is not in their best interest.” |
| Choice | Choice |
| KPMG | “Higher loadings to offset adverse selection can make [group policies] more expensive.” |
| Rice Warner | “Retail policies can offer better premiums, fewer exclusions, and better terms.” |