Insights
Is the Insurance in My Super Enough?
Written by Safety Nest
The short answer
For many people, the default insurance inside super is not enough on its own. It is convenient and easy to get without health questions, but the cover amount is often well below what a family actually needs, and it may not even clear a mortgage. Default super cover is a useful starting point rather than a complete safety net, and it can be topped up or supplemented with a tailored retail policy. Below is how default super cover generally works in Australia, and the parts most people are surprised by.
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Insurance in Super: Is Your Default Amount Enough?
Read the transcript
Is the insurance in your super enough? It may not be enough on its own. Most super funds give you life and TPD insurance automatically, for a set amount.
Whether that's enough depends on what you'd need it to do. It does some things well. It can be cheaper, because funds buy it in bulk.
And you can often get it without medical checks. But there are three things worth checking. Let's walk through it with Mia, our example.
She's a nurse with two kids and a mortgage. Her insurance came with her super, and she's never looked at it. So is it enough?
The first thing to check is the amount. Default insurance in super is for a set amount. Moneysmart says it may be lower than what you could get outside super, and it might not match your needs.
Now think about what it would need to do for Mia. Pay off the mortgage, and support two kids. Hers might be enough.
It might fall short. The second thing: it can stop. Mia also has an old super account, from a job she left a few months ago.
By law, a super fund cancels the insurance on an account that's had no contributions for at least sixteen months. The fund contacts you first, and you can ask to keep it. Until then, she may be paying premiums on both accounts.
And she may not be able to claim the full benefit from both. It depends on the policies. That's why Moneysmart says to check your insurance before you change super funds or close an account.
The third thing is how a TPD claim is tested. TPD inside super generally uses the stricter, any occupation, test. If Mia could never work as a nurse again, but could do other work suited to her education, training or experience, it may not pay.
Does that make super insurance bad? No. The premiums come out of your super, not your pay.
That can be easier, and for some people more tax-effective. But it reduces your retirement savings. It's a trade-off.
So is Mia's enough? It depends on what her family would need, whether it's still in place, and how a claim would be tested. Think about yours.
Log in to your super account, or check your annual statement. See what insurance you have, how much, and when it ends. Not sure what yours says?
We can go through it with you. We're Safety Nest. Five stars on Google, and we've helped hundreds of Australians with their life insurance.
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Is the default insurance in my super fund enough?
Often it is not enough on its own. Default cover inside super is set up to be simple and automatic, so the amount is usually a standard default figure rather than something matched to your mortgage, debts, income and family needs. For many households that default amount falls short of what would actually be required if the worst happened. It is genuinely valuable cover, especially because it is easy to obtain, but it is best thought of as a foundation rather than the full picture.
Does my default super cover my pre-existing conditions?
Not always in the way people assume. One of the big advantages of default super cover is that it is usually issued without full health questions, which makes it medically easy to get. The trade-off is that cover added this way can still carry exclusions or limits, and the policy definitions can be stricter than a fully underwritten retail policy. So "I got it without a medical" does not always mean every condition is fully covered. It is worth checking the actual terms rather than assuming.
If I stopped contributing, am I still covered?
Not necessarily. Cover inside super can reduce as you get older, and it can lapse if contributions stop or the account becomes inactive. Super funds are generally required to switch off insurance on accounts that have been inactive for a period, unless you have opted in to keep it. So a job change, a career break, or simply consolidating old accounts can quietly leave you without the cover you thought you had. If your situation has changed, it is worth confirming the cover is still in place.
Foundation vs full picture
Default super cover vs tailored cover
Default cover is a starting point rather than a complete safety net.
Default super cover
Simple, automatic, standard default amount
- Cover amount
- Standard default figure, often falls short
- Health questions
- Usually issued without full health questions
- Definitions
- Can be stricter, may carry exclusions
- Staying in force
- Can reduce with age or lapse if inactive
Tailored cover
Matched to mortgage, income and family
- Cover amount
- Sized to your debts and family needs
- Health questions
- Fully underwritten retail policy
- Definitions
- Generally broader than default cover
- Staying in force
- Held independently of super activity
Why is my super cover worth less than a year of my income?
Because default amounts are set as a standard figure, not calculated from your income or debts. A default death or disability benefit is often a modest lump sum, and any income protection held inside super typically has a limited benefit period, commonly around two years, rather than paying through to retirement age. That means the protection can run out well before you are back on your feet. The amount reflects what is simple to administer for everyone, not what your particular household would need.
Common misconception: "my super already covers me"
This is one of the most common beliefs we hear, and it is only half true. Yes, most super accounts include some default insurance, so you are probably covered for something. But "covered" and "covered enough" are very different things. The default amount is often well short of clearing a mortgage and replacing income for the years a family would need, definitions can be stricter, and the cover can reduce or lapse over time. Assuming super has it handled is exactly how people end up underinsured without realising.
Should I add to or replace my super cover?
It depends on your situation, and both are common approaches. Many people keep their super cover and add a tailored retail policy on top to lift the amount and improve the definitions, while others restructure their cover entirely. The right mix depends on your mortgage, income, family, health and how the premiums are funded, since paying premiums from super draws down your retirement balance. This is exactly the kind of thing worth talking through with an adviser rather than guessing.
Relying on default super cover is especially common among FIFO workers, whose rosters and incomes rarely match a default policy. We cover that in life insurance for FIFO workers.
FAQs
Frequently asked questions
Is the default insurance in my super fund enough?
Often not on its own. Default super cover is convenient and easy to get, but the amount is usually a standard figure that can fall well short of clearing a mortgage and protecting a family. It is best treated as a foundation that can be topped up.
Does my default super cover my pre-existing conditions?
Default super cover is usually issued without full health questions, which makes it medically easy to get, but it can still carry exclusions or limits and the definitions can be stricter. It is worth checking the actual policy terms rather than assuming everything is covered.
If I stopped contributing, am I still covered?
Not necessarily. Cover inside super can reduce with age and can lapse if contributions stop or the account becomes inactive, since funds generally switch off insurance on inactive accounts unless you opt in. It is worth confirming your cover is still active.
Why is my super cover worth less than a year of my income?
Because default amounts are set as a standard figure rather than calculated from your income and debts, and any income protection inside super often has a limited benefit period, commonly around two years. The amount reflects what is simple to administer, not what your household would need.
Should I add to or replace my super cover?
Both are common. Many people keep their super cover and add a tailored retail policy on top, while others restructure entirely. The right approach depends on your mortgage, income, health and how premiums are funded, so it is best reviewed with an adviser.
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