Should You Review the Default Insurance in Your Super? — General Advice Guide

Many Australians have some form of insurance automatically included in their superannuation fund. This is often referred to as default insurance. It’s convenient and generally cost-effective, but it’s not always clear whether the default level of cover is suitable for your situation.

This article explains how default super insurance works, the typical benefits and limitations, and why reviewing it regularly can be important. This is general information only and should not be interpreted as a recommendation.

What Is Default Insurance in Super?

Most super funds include basic group insurance for members, which can include:

• Life Insurance (Death Cover)

• Total and Permanent Disability (TPD) Insurance

• Income Protection (in some funds)

Premiums are deducted from your super balance rather than your bank account, which can help with cash flow.

Potential Advantages of Default Super Insurance

Default cover can provide useful benefits, including:

1. Easy Access

Typically no medical checks are required because the cover is provided on a group policy basis.

2. Cost-Effective Premiums

Group premium rates are generally lower than individually-underwritten insurance.

3. Automatic Protection

Members receive some level of insurance without needing to apply or complete assessments.

Things to Be Aware Of With Default Insurance

While default super cover is convenient, there are common characteristics that may not suit everyone:

1. Cover Levels May Be Limited

Default amounts are often relatively low compared to major financial commitments such as mortgages or dependants’ expenses.

2. Policy Definitions Can Vary

TPD and income protection definitions differ between funds and may affect whether a claim can be made. Conditions and exclusions also vary.

3. Insurance Can Be Cancelled Automatically

Under legislation (e.g., Protecting Your Super), insurance may automatically cease if the account becomes inactive or has a low balance.

4. Premiums Reduce Your Super Balance

Although premiums don’t affect your disposable income, they do reduce retirement savings over time.

5. Occupational Classifications May Not Match

Some funds use standard classifications that may not reflect specific occupations.

When People Commonly Review Their Insurance

People often review their insurance when:

• They change jobs or super funds

• They open or consolidate super accounts

• They want to understand their existing cover

• They notice insurance premiums increasing

• They want clarity about policy conditions

These are general triggers only and not recommendations.

Insurance Inside vs Outside Super — General Comparison

Some individuals consider insurance inside super, outside super, or a combination. Each option has general pros and cons:

Insurance Inside Super (General Features)

• Paid from super contributions

• Group pricing

• Limited personal underwriting in many cases

Insurance Outside Super (General Features)

• More flexibility in policy structure and definitions

• Generally requires full underwriting

• Premiums paid from personal cash flow

Which structure is suitable depends entirely on a person’s circumstances, needs and financial objectives — and requires personal advice.

How Covermate Life Helps — In a General Advice Capacity

Covermate Life can:

• Provide information about typical features of insurance in super

• Help you understand how policy definitions and conditions generally work

• Compare general differences between types of insurance arrangements

• Assist with the process of obtaining quotes

We do not provide personal financial product advice. If you require personal recommendations tailored to your situation, we may refer you to a licensed financial adviser.

Final Note

Default insurance in super can provide a helpful safety net, but it is important to review it regularly so you understand what you are covered for, what you are paying for, and how the policy operates. This article is general in nature only and should not be relied upon as personal advice.