What is insurance in superannuation? 

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Insurance is designed to protect what is important to you in case of an emergency, or in extraordinary circumstances. 

You can take out insurance on its own or you may have insurance cover within your superannuation.  If you are employed, and you have superannuation payments being made to a specific fund, you can usually elect to be covered by additional insurances.

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​What can insurance in superannuation cover?

 

Superannuation funds offer their members different types of insurance through their superannuation. 

The premium payments for the insurance are usually deducted monthly directly from your superannuation account. 

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The three most common types of insurance product offered by superannuation funds are:

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• Life cover (commonly known as Death cover)

  • This insurance option offers a lump sum payment to the listed beneficiary or beneficiaries if you pass away.

  • Depending on the superannuation fund you are with, you may automatically receive a basic level of life cover once you are eligible without having to provide personal health information to the insurer. In this case, if you do not want life insurance cover you will need to opt out. 

  • Some Life covers also provide cover for terminal illnesses (conditions which a specialist doctor certifies will result in your death within a specific period, such as 12 or 24 months). 

 

• Total and permanent disability (TPD) insurance

  • TPD insurance pays you a benefit if you are unlikely ever to be able to work again due to an injury or illness (although the specific definition depends on the insurance contract).  

  • You generally must have been absent from work continuously for a specified period of time, such as 3 or 6 months.

  • If you are paid a TPD benefit, you may also be able to access your superannuation account balance.

 

• Income protection (IP) insurance

  • IP insurance, sometimes known as salary continuance insurance, pays an amount up to a percentage of your pre-disability regular income for a specific period of time if you are not able to work due to an illness or injury.  

  • You generally have to be unable to work, because of illness or injury, for a specific period of time before you can claim IP benefits (the waiting period). 

  • Benefits are normally paid on a monthly basis for a period of time set out in the insurance policy (such as for 2 years or 'to age 65').

  • You can apply for age-based or fixed cover for IP insurance.

 

This is not an exhaustive list of superannuation insurance products.  

You should talk to your superannuation fund trustee about the insurance options they canoffer you. 

You should also speak with your superannuation fund trustee about the terms and conditions of the specific insurance cover that you may have.

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Nominating Beneficiaries of Life Insurance in Superannuation

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If your insurer and superannuation trustee accept your claim for IP benefits the insurer will pay the amount to you directly.

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If however the insurer accepts a TPD or Life insurance claim, the amount is paid into your superannuation account balance. 

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In relation to a TPD benefit, your superannuation fund trustee will be required to consider whether you are eligible to access the TPD benefit amount and your superannuation account balance before retirement.

In relation to a Life insurance (also called Death) benefit, the superannuation fund trustee will need to determine to whom it should pay the Life insurance benefit and your superannuation account balance. You can nominate:

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• (a) one or more 'dependents'; or 

• (b) your estate

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to receive the Life insurance benefit and your superannuation account balance in a 'binding death benefit nomination' form (Form).

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If the Form is valid it requires the superannuation fund trustee to pay the Life insurancebenefit and your superannuation account balance as set out in the form. 'Binding death benefit nominations' can be lapsing (when they will be valid for a period, such as 3 years) or non-lapsing (when they will be valid until they are changed or cancelled).  

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If there is no Form or it is not valid, the superannuation fund trustee will be required to determine which 'dependent(s)' or your estate it will pay the Life insurance benefit and your superannuation account balance to.

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If you want to confirm who will receive any Life insurance benefit and superannuation account balance, you should talk to your superannuation fund trustee about completing a Form. You should also think about whether any Form you complete is lapsing or non-lapsing.

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Claims Process

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Superannuation fund trustees obtain life and disability insurance cover for their members. Each superannuation fund trustee will have their own process to manage claims made under those insurance policies.

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To find out more about your superannuation fund trustee's claims process, you can go to theirwebsite, or ask them by telephone or email.

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The claims process follows these general steps:

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1. Contact your superannuation fund trustee and let them know you want to make a claim. 

2. You should receive claim documents to fill out.  These documents will ask for your personal details, what you want to claim for, and ask you for supporting evidence (such as a medical report from your doctor).  

3. Your superannuation fund trustee will provide your documents to the relevant insurer,which will then appoint a claims assessor to review your claim. 

4. The claims assessor will provide updates on the status of your claim. They may also request further information or evidence regarding your claim. 

5. A decision will then be made on your claim. In particular:

   1. If your claim is accepted, you will receive written confirmation that your claim has been approved. You may also be asked to confirm any further details needed for the payment(s) to be made. 

   2. If your claim is denied, you will receive a letter confirming that your claim has been denied, the reasons for the claim being denied, and what remedies are available to you (including lodging a complaint).

   3. Sometimes, a claim might be closed or deferred. For example, a claim may be deferred until the results of surgery are known or if you do not provide evidence which the claims assessor says is required to determine the claim. You should be advised of the reason for this decision in writing and (if appropriate) given the opportunity to provide the further information or evidence said to be necessary to review your claim.

 

The claims process can often take months to complete. Depending on the type of cover, your superannuation fund trustee may notify you of its decision within 7 months of your claim being lodged. 

The above is general information only. To confirm your superannuation fund trustee's claims process, we encourage you to contact them directly.​​

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Dispute Resolution Options

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If your superannuation fund trustee has made a decision that you do not agree with (or if there is another aspect of the claims process which you are unhappy with), you can make a complaint using the 'internal dispute resolution' process. 

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While each superannuation fund trustee has its own process, the superannuation fund trustee must respond in writing setting out:

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• (a) its view on your complaint submissions (and the reasons for its view, if it rejects your submissions); and 

• (b) your right to take the complaint to the Australian Financial Complaints Authority (AFCA) if you are unhappy with the superannuation fund trustee's decision.

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If you are not satisfied with the superannuation fund trustee's response to your complaint, you may make a complaint to AFCA. 

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AFCA is a tribunal which provides a free and independent process to resolve your complaint. ACFA reviews decisions by superannuation fund trustees and makes decisions which are fair and reasonable in all the circumstances (subject to the superannuation fund's rules and the law). A decision by AFCA is generally binding on the superannuation fund trustee (and the insurer) but not on you.

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You can also commence Court proceedings to challenge the decision of the superannuation fund trustee (and the insurer). You should obtain legal advice if you are considering commencing Court proceedings.  

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Common questions and responses

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Q: Will my premiums increase after I have made a claim for my insurance through superannuation?

A:  If you have made a claim, the cost of your cover should not increase above the cost for your working rate, cover amount, and working age.  However, your cover may end after payment of a benefit (depending on the type of cover).

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Q: Who else can I ask about my insurance in superannuation and entitlements? 

A: You may have more questions about insurance in superannuation and your entitlements.  You may want to seek some advice from a financial advisor or lawyer if you are not sure what action(s) you should take when it comes to insurance in superannuation.  Advice specific to your personal circumstances is often the best way to find out what cover is right for you. 

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Q: I have cancelled my insurance cover. Can I still make a claim?

A: If you want to make an insurance claim, you can only make a claim for events that have happened before you cancelled the cover.  

A statute of limitation applies to making claims (often six years after the relevant event). You should seek legal advice if you have cancelled your insurance in superannuation but think that you are entitled to make a claim.