The Pros And Cons Of Life Insurance Via Your Superannuation In Australia

Most super funds in Australia automatically provide the named holder with a certain level of life insurance and total permanent disability (TPD) insurance. Millions of people have this automatic life insurance in Australia as one of the benefits associated with their superannuation fund. However, not all of them are aware they even have this coverage and fewer still understand what it means when providing for their loved ones in the event of the unthinkable. 

In this article, we will look at the differences in coverage between retail life insurance in Australia and that provided by policies through typical super funds. The aim is to answer the question: Is it safe to rely solely on life insurance in Australia through your superannuation in Australia? Let’s start by looking at the advantages of life insurance in Australia, as provided by a standard superannuation fund.


  • Acceptance is guaranteed — No health checks will be required and if you are eligible for a super fund, you are also entitled to its associated life insurance, as simple as that.
  • Ease of use — Any necessary premiums will be deducted from your super account automatically with no further actions required.
  • Tax planning — Under certain circumstances, payouts from TPD and life insurance in Australia are tax-free.


  • Premiums will be higher — Life insurance in Australia provided through superannuation will never compete with retail versions in terms of price.
  • Coverage will be reduced — The coverage provided is unsatisfactory compared with retail versions.
  • Coverage decreases with time and expires earlier — whereas standard policies cover people up to age 73, super ones do not and can expire as early as 65.
  • Regular renegotiation — The agreement between the trustee and insurer must be renegotiated, usually every 2 years and the policy’s renewal is not guaranteed. 
  • Payouts — Often much slower with beneficiaries restricted to financial dependants or the estate only.
  • Tax — A potential advantage on occasion, there is also a good chance that dependants will find themselves liable for tax on any payouts.
  • No additional benefits — Legislation specific to superannuation funds means they cannot provide additional coverage for things like funeral costs, therapy sessions, travel reimbursements, or other benefits that some retail policies include.
  • Regular contributions are mandatory — If you stop paying into your superannuation for any reason, or the balance drops below a preordained level, your life insurance in Australia will cease automatically.


Life insurance in Australia is not something everybody wants or needs and is a personal choice each individual must make themselves. Those with no significant beneficiaries may feel comfortable without life insurance, instead opting for income protection. As always, it is important to do your research diligently and apply your exact set of circumstances to the scenario.

However, for those who do require life insurance, taking all the factors above into account, it’s obvious that superannuation-based life insurance in Australia is insufficient for most people. There are too many disadvantages in relying solely on super-based policies, when we consider they actually represent a more expensive option, the choice should be clear for all to see. 


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