Types of insurance in super

There are three types of insurance typically offered through your super:

At a glance

  • There are three types of insurance cover typically offered through super:
    • Death (including terminal illness) cover
    • Total and permanent disability cover
    • Temporary salary continuance cover.
  • Premiums are paid within your fund from contributions (pre-tax or post-tax) and/or from your super account balance.
  • Automatic cover within super is normally offered at basic levels.

Death cover

Death cover, also known as life insurance, pays a lump sum to your beneficiaries if you die or, depending on the super arrangement, become terminally ill.

It can help meet the costs of your mortgage, debts, funeral costs and provide dependants with a lump sum.

Total and Permanent Disability (TPD) cover

TPD insurance provides a lump sum to help cover your living expenses and rehabilitation costs if you become totally and permanently disabled. This is only available if you also take death cover.

In the past you could only access a TPD insured benefit if you satisfied the permanent incapacity condition of release.As of 1 July 2014, you'll need to satisfy the same conditions of release that you'd need to satisfy, if you were claiming your super. If not, the benefit will be invested into your super account until it can be paid to you.

Temporary Salary Continuance (TSC) cover

Also known as income protection, this cover provides a monthly income of up to 75% of your salary if you suffer an illness or injury and become unable to attend to your normal duties.

TSC insurance held inside super may provide cover for either a two year benefit period or up to age 65.

What you need to know

  • Insurance through your employer's super is usually negotiated on a group level. This means the premiums are likely to be competitively priced.
  • Default insurance cover provides a basic level of insurance and does not involve a medical assessment, but it may not be enough.
  • If you want to increase your cover you may need a medical assessment.
  • There are tax issues you should be aware of when considering holding or increasing your insurance cover within super compared to outside super.
  • You will have to nominate who you would like to receive your super benefits following your death. Simply updating your will is not enough.

Taxing issues

There are some important tax issues you need to be aware of when deciding between taking insurance inside or outside of super, as it will impact your premiums and the benefit.

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