Life insurance through Super is the most common way Australians obtain life insurance (including Income Protection and Total Permanent Disability (TPD) insurance).
Let’s explore:
What is life insurance through Super?
Life insurance through Super (or default life insurance) is automatically included in your Super fund membership. It provides a lump sum payment to your beneficiaries if you pass away or become terminally ill.
70% Australians with Super1 have some form of default life insurance coverage, often bundled with Income Protection and Total and Permanent Disability (TPD) insurance.
This insurance is paid for through your Super contributions, with premiums automatically deducted from your super balance.
Convenient, right!
While convenient, life insurance through Super is designed to provide essential coverage by default. You can change this through your Super, though it is possible that life insurance through Super cannot meet your specific needs and circumstances.
What is Income Protection insurance?
Income Protection insurance pays you a portion of your regular income if you’re unable to work due to illness or injury.
Income Protection insurance is designed to help cover essential living expenses—like rent or mortgage, groceries, and bills—while you recover. Policies typically cover up to 70% – 75% of your pre-tax income2 and can continue under life insurance through Super for up to two years.
Income protection insurance is different from workers compensation, because it can cover you even if the illness or injury happened outside of work.
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Income protection is limited to two years3 under life insurance through Super.
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Income protection under life insurance through Super may not pay out4 if you are unemployed or not working at the time of injury or illness.
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Income protection under life insurance through Super is calculated on your past 12 months’ income5.
What is Total and Permanent Disability (TPD) insurance?
Total and Permanent Disability (TPD) insurance provides a lump sum payout if you become permanently unable to work due to illness or injury.
TPD designed to help cover the long-term costs of living with a disability—such as medical expenses, rehabilitation, home modifications, and everyday living costs.
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Under life insurance through Super, TPD is only offered as “any occupation”6. Under this definition, you have to be unlikely – due to illness or injury – to ever work again, in any field you reasonably could.
How life insurance through Super works
A short history of life insurance through Super
Superannuation in Australia was first introduced in the early 20th century for select public servants and expanded gradually. However, the modern and compulsory system began with introducing the Superannuation Guarantee (SG) on 1 July 1992, under Treasurer Paul Keating.
This mandated employer contributions to workers’ retirement savings and laid the foundation for widespread coverage. Over time, the system evolved to incorporate default life insurance within superannuation, particularly following reforms in the early 2000s.
From 1 July 2005, under changes linked to the Choice of Fund legislation, employer default super funds were required to offer a minimum level of life (death) insurance to members who didn’t actively choose a fund or policy. This made superannuation the primary source of life insurance coverage for many Australians.
However, reports like Rice Warner’s 2020 Underinsurance in Australia highlighted that around 75% of Australians with dependents remain underinsured, despite having cover through super, prompting further reforms such as the Protecting Your Super Package (2019) and Putting Members’ Interests First (2020), which aimed to ensure insurance through super is both appropriate and sustainable.
1992
Superannuation Guarantee
The introduction of the Superannuation Guarantee made super contributions mandatory for employers.
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Understanding the limitations and risks of life insurance through Super
Life insurance through super is a convenient safety net for many Australians — it’s automatic and generally affordable, and premiums are paid from your Super balance, not your take-home pay.
For many, it’s their only form of cover.
However, it’s essential to understand the limitations of life insurance through Super. More comprehensive life insurance policies can often still be structured through super with better outcomes.