You open your annual super statement, scroll past the investment returns, and there it is: a line called "insurance premiums". A few hundred dollars. Maybe a few thousand. Money that left your retirement savings last year without you deciding anything.
Most of us never chose that cover — it arrived with the job. And because the premiums come out of a balance we don't spend from, it's easy to leave alone for twenty years, paying for cover we may not need or carrying cover far too small for the people who depend on us. So let's open the statement properly: not to cancel anything in a hurry, but to understand what you own and whether it still fits the life you have now.
What your fund has probably given you without asking
Most funds automatically provide two types of cover: life cover, which pays a lump sum when you die or are terminally ill, and TPD — total and permanent disability — which pays out if illness or injury means you're unlikely ever to work again. Some funds also include income protection, or salary continuance, which pays a regular income for a set period if you can't work for a while.
This default cover is a genuinely good thing for a lot of people. It comes without medical checks, which matters enormously once you're over 50 with some history on your file. It's bought in bulk, so premiums are usually cheaper than an equivalent retail policy. And it reaches people who would never get around to arranging cover themselves. Research from the Association of Superannuation Funds of Australia found 8.8 million Australians held life cover through super and 8.1 million held TPD cover in the year to June 2024, with funds paying $1.7 billion in death benefits and $3.0 billion in TPD claims that year.
The catch is in the word "default". The amount was set by a formula, not by your mortgage, your kids, or your partner's income.
Finding out what you're actually paying
Log into your fund or pull up your last annual statement. You want four things: the type of cover you hold, the sum insured for each, the annual premium for each, and any loadings or exclusions attached.
Loadings are worth a close look. A fund may add a percentage to your premium because of your occupation, your health history, or because you're recorded as a smoker. Change jobs, give up smoking, or get classified wrongly, and you can be quietly overpaying for years. One phone call fixes that.
Then there's the multiple-account problem. Three super accounts with default insurance on two means three sets of premiums, and often you couldn't claim on all three anyway. Consolidating helps — but check the cover in each account before you close anything, because a pre-existing condition or an age over 60 can mean you never get it back.
The cover that quietly disappears
Insurance inside super is not set-and-forget, and two rules catch people out. The first is inactivity. By law, a fund must cancel insurance on an account that hasn't received a contribution for at least 16 months. Your fund writes to you first, and you can keep the cover by saying so or by making a contribution. But if that letter arrives during a career break, a stretch of self-employment, or a period of caring for a parent — exactly when cover matters most — it is very easy to miss.
The second is age. TPD cover through super typically ends at 65 and life cover typically ends at 70, and many funds reduce the sum insured as you get older. So the cover thins out through your fifties and sixties even as the premium stays uncomfortably visible — the opposite of what most people assume.
Who gets the money — and what the tax office takes
A life insurance payout from your super doesn't go where your will says. It goes to your fund's trustee, who pays it according to super law and the nomination you've made. If that nomination is out of date — an ex-partner, or nothing at all — the outcome may not be the one you'd have chosen.
Tax matters too. A super death benefit paid as a lump sum to a dependant for tax purposes — a spouse, a former spouse, a child under 18, or someone financially dependent on you — is tax free. Paid to a non-dependant, such as a financially independent adult child, the taxable component is taxed: the Australian Taxation Office applies 15% to the taxed element and 30% to any untaxed element. And here's the sting — insurance proceeds generally land in the taxable component, so a $500,000 life policy inside super can leave an adult child with a materially larger tax bill than the same policy held outside super.
Income protection is different again. Those payments replace your wage, so they're taxed like your wage: any amount you receive goes in your tax return. Waiting periods usually run from 14 days to two years, and benefit periods are commonly two years, five years, or up to a set age such as 65. Check which you have — a two-year benefit period is a very different safety net from one running to 65.
What to do if you're not sure
You don't need a decision today — you need the facts in front of you. Find the premium on your statement, write down the sum insured for each type of cover, then ask one blunt question: if I died or couldn't work again next month, would this amount clear the mortgage and keep my family going until super and the age pension take over?
If the answer is comfortably yes, the premium is buying something real. If it's no, you have a gap worth addressing while you're still insurable. And if the mortgage is gone, the kids are independent and your partner would be fine on their own super, you may be paying for a promise nobody needs — money better off compounding in your balance for the next fifteen years.
Two cautions. Don't cancel cover on the strength of a blog post, including this one: once it's gone, your age and health decide whether you can get it back. And cover outside super isn't automatically better — premiums usually cost more in cash terms, but they come from your take-home pay rather than your retirement savings, and the tax outcome for beneficiaries can differ a lot. As Noel Whittaker's writing on super keeps returning to, the useful question is whether this arrangement, at this price, still does a job in your life.
So read the statement, make the phone call, then decide deliberately — more than most people in their fifties have ever done with this line item.
For the whole picture on how super works — contributions, tax, insurance and the decisions that matter most in the decade before you stop working — Super Made Simple (7th Edition) by Noel Whittaker lays it out in plain English, updated for the current financial year. It's $16.95 when you buy direct from the author, in both PDF and EPUB.
This article is general information only and doesn't take account of your personal circumstances. Figures are current at time of writing and change each financial year. Consider seeking advice before acting.