Life insurance and your super – opt in or out?

1 December 2022

There has been a lot of media coverage surrounding default life insurance cover as part of your super. The main benefit of default cover inside super is that the premiums are deducted from your contributions. The main disadvantage is the premiums deducted reduce the account balance and potentially your retirement savings.

Life insurance inside your super certainly has a role when it comes to protecting you and your lifestyle. However, here are a few other things you should consider when opening a new super account or when you are reviewing your super statement for the end of this financial year.

If you’re under 25 years of age

Cover inside super for younger people is generally not a good option as they have very few assets and often don’t even know they are paying for life insurance.

As a consequence, the Federal Government announced it will make life insurance cover an opt-in for people under 25 years. This means if you are under 25 you will need to make a conscious decision to take out cover. For the majority of people in this age group, the need for life insurance is very low.

Even if you don’t have any dependants or a partner, there may still be debts to pay and funeral expenses to cover if you were to pass away. For example, the average basic cremation in Australia costs upwards of $4,000, with burials costing much more.

It’s default cover

The default cover levels are usually fairly low. This can be a good arrangement if you are young, single and life insurance is not high on your priority list. But if life insurance is important to you to help protect your family’s financial future, this one-size-fits-all approach may not offer sufficient protection. You might find that it makes sense to compare life insurance policies to find one that offers the appropriate level of cover for your particular needs, and provides value for money.

You can top up your super cover

If you do have existing cover through your super fund, it’s important to know that you don’t have to rely on it alone. Most superannuation funds will provide you with options to increase your cover (you may need to provide additional medical information) or you can shop around for a life insurance quote and top up your super policy with an independent policy.

Life insurance inside your SMSF

Self Managed Superannuation Funds (SMSFs) have experienced a surge in popularity in recent years. If you are the trustee of an SMSF, it’s important to know that you are required by law to consider whether the members of the fund wish to take out life or other insurance.

Package deals

In many cases, your super fund’s default life insurance is packaged with Total and Permanent Disability insurance (TPD) (covering you if you become permanently unable to work in specific circumstances) and/or Income Protection Insurance (in case you are suddenly unable to work for some time).

Outside of superannuation, TPD and Income Protection Insurance are generally optional extras to a life insurance policy. If you take out life insurance independently of your super you might be able to access higher levels of cover. Whether you decide to keep your insurance within your super or take out a standalone policy, if you are seeking insurance to look after your family in a worst-case scenario, then it might be a good idea to consider if TPD and income protection insurance should be included in your policy portfolio.

Need help assessing your life insurance needs?

Regardless of what decision you make about holding life insurance through your superannuation fund, it is important to compare life insurance policies to ensure that you have the best cover to suit your individual circumstances and life stage. You can use the Noble Oak life insurance calculator to help you assess how much and what type of life insurance you might require.


To learn more about NobleOak’s life insurance products or to request a quote, call NobleOak on 1300 041 494. As a AMA member you can receive a 10% lifetime discount on Life cover within NobleOak’s My Protection Plan – be sure to mention ‘AMA Victoria’ when you call.


AMA Victoria Preferred Suppliers