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Benefits of Insurance Through Super

  • No out-of-pocket costs as premiums get paid from your super fund.
  • No medical tests needed during application. 
  • Life insurance, TPD and Income Protection premiums are generally tax-deductible to the fund.
  • You can purchase additional benefits when linking your personally owned cover with your super plan.
  • You can apply if you are aged between 15 and 73 years old.

Insurance Through Super

Did you know many of the insurers we compare allow you to take out a life insurance policy through your superannuation fund or self-managed super fund (SMSF)?

By taking out cover through your fund, your premiums are paid for by your super fund, freeing up cash flow and potentially making cover more affordable.

What insurance is available through super?

Terminal Illness Benefit

Most life insurers offer a terminal illness benefit which provides you with your lump sum life insurance benefit upon diagnosis of a terminal illness.

If you have your life insurance policy within super and you receive this benefit, it will generally be able to be released from your super fund, tax-free and regardless of your age, to your beneficiaries upon diagnosis.

TPD Insurance through Superannuation

It is generally possible to take out TPD Insurance through superannuation; however, there are a number of things you need to be aware of, especially when it comes to Own Occupation TPD.

*Please note from 1 July 2014 Own Occupation TPD is no longer available through superannuation.

Trauma Insurance through Superannuation

From July 1 2014, Trauma or critical illness insurance is no longer available to be taken out through your super fund as it is not possible to access the benefit if a claim was made.

Income Protection through Superannuation

Most life insurance companies we work with allow your income protection policies to be taken out through your super fund as salary continuance.
However, you need to be aware of condition of release issues surrounding your monthly benefit.

How does life insurance through superannuation work?

Life Insurance through superannuation works in much the same way as a policy held outside of super with a few subtle differences:

Policy Ownership

When you take out a life insurance policy through a super fund, the super fund becomes the policy owner and any benefit paid out is paid out to the super fund, not to you personally.

In order for you or your beneficiaries to access your life insurance benefit, you will generally need to meet a ‘condition of release’ as defined under the Superannuation Industry Supervision Act (SIS).

Generally, death or terminal illness will allow the funds to be released to you however this may be at the discretion of your insurer and the super fund.

Premium funding

Premiums are funded by your super fund which means you need to make sure you have the necessary funds available in your fund to pay for the premiums.

This can be done with either a partial or full rollover from an existing super fund.

Nomination of Beneficiaries

Like a normal life insurance policy, you can nominate beneficiaries to receive your life insurance benefit.

There are two types of nominations options:

Advantages of Life Insurance through superannuation

Disadvantages of Life Insurance through superannuation

Types of Super Funds

Self Managed Super Funds

If you are a member of a SMSF, the trustee of that fund can purchase the policy on your behalf and it will be issued in your name, with the trustee of the fund as the policy owner.

Any benefit that is paid out will be paid to the trustee and the trustee of your SMSF can only pay you or your beneficiaries the benefit if it is allowed to according to the deed of the trust and relevant superannuation law.

Non-SMSF

If you do not have a SMSF, you can generally set up a fund through your life insurer. This fund will in most cases not be a non-investment product and contributions made to the fund will match your premium amount.

Alternatively, if you already have a retail super fund established, you can elect to set up your insurance policy through your current fund.

Industry Super Fund

If you have an industry super fund such as REST, Hesta or CBUS, you can generally elect to Rollover funds from your existing complying industry super fund to pay for your life insurance premiums.

Essentially, money from your super fund will be transferred or rolled over from your existing fund to pay your premiums.

Flexible Policy Options

A number of options are available to you to help make your policy more flexible:

Combined Policies

If you take out insurance through your super fund, you can still elect to have a ‘combined’ or linked policy where your covers are all combined into the one policy. However please note that Own Occupation TPD and critical illness are not able to be taken out through your super fund.

Flexible Policy Linking

To combat the inability of certain covers to be taken out through super, insurers have introduced ‘Flexible Policy Linking’, which allows you to split your policy ownership between superannuation ad individual ownership.

What are the tax incentives of life insurance through super?

Premiums paid for by your superannuation may be fully tax deductible to your fund. Generally, life insurance premiums will be fully tax deductible; however TPD premiums may only be partially tax deductible depending on the definition of TPD chosen.

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