Many Australians have default life insurance through their super - the cover that's applied automatically by the fund, paid from your super balance, and set up without any choice on your part.
This guide is about that default cover. There's a separate option called retail-in-super, where you choose a retail policy and pay the premiums via super, which behaves differently - that's covered in our super vs retail comparison.
Default cover is set and forget - easy to maintain and paid for you from your super account. What's not to like? But that hides some real trade-offs and risks worth knowing before you assume you're sorted.
In this guide:
- What default insurance in super actually is and how you got it
- What it covers, and what it doesn't
- The trade-offs most people don't realise until they need to claim
- When it still makes sense, and when to look at alternatives
- What happens when you change jobs, change funds, or stop contributing
What is default life insurance in super?
Default life insurance is a policy held inside your super fund, with premiums automatically deducted from your balance. This guide covers default cover offered through both industry funds, like AustralianSuper, REST and Cbus, and retail super funds, like AMP and MLC. The mechanics are similar.
The key features:
- Set up automatically when you turn 25, your balance reaches at least $6,000, and you have not previously opted out
- Owned by the super fund - not by you. This matters at claim time.
- Paid from your balance - so it does not hit your bank account, but it does reduce your retirement savings
- The amount of cover is set by the fund - not tailored to you, and can vary over time
Not sure if you've got it?
Most people who've had super for more than a couple of years have some default cover. To check:
- Log into your super fund's member portal and look for "insurance" or "cover" in your account summary
- Check your most recent super statement - default cover and premiums are listed
- Call the fund and ask for your current insurance summary
What you're looking for: the type of cover, the cover amount, and the premium being deducted. If you have multiple super accounts, each fund may have its own default cover and premium - and you might be paying for cover you've forgotten about.
Why default cover exists
Super funds provide default insurance to make sure most members have at least some cover. It's also a differentiator - as more funds open to the public, default insurance is one way industry funds in particular offer something extra.
It's designed to be:
- Easy to access - low or no underwriting, usually no medicals
- Priced for the population of the fund - group rates, not individual rates
- Simple to maintain - set and forget
What it isn't:
- Tailored to your circumstances - the cover amount is set by the fund, not based on your debts, dependants or income
- Stable over time - default cover amounts shift as you age, often dropping sharply later in life
- Portable - if you change funds, your cover doesn't move with you
- Fully featured - super rules limit what can be covered, so add-on benefits common in retail policies aren't available
- Comprehensive - trauma insurance is not available inside super at all
What's typically covered
Cover varies by fund. Some offer just life cover, some include TPD, a few include income protection. Trauma insurance isn't available through super.
Where TPD and life are both offered they're usually linked - meaning a successful TPD claim reduces the available life cover. If you claim $200,000 in TPD on a $300,000 linked life policy, you have $100,000 of life cover left.
Default policies also come with the standard exclusions and waiting periods you'd expect from a group insurance contract, including pre-existing condition limits in the first months of cover and waiting periods on income protection if it's part of your fund's offer. The detail varies by fund and is set out in your insurance booklet.
Default cover amounts
The average default life cover across Australian super funds is often less than $200,000. Set against an average new Australian home loan above $700,000, that's a gap most families would feel immediately. Even on a shared mortgage with a partner, $200,000 covers just over half of a $350,000 share.
Most people don't review their super insurance until something changes - a mortgage, a baby, a partner - and by then the gap can be significant.
The trade-offs most people don't realise
Cover decays as you age
Default cover isn't fixed. It typically rises through your 30s and 40s, peaks in the middle years, then drops sharply from your 50s onwards. The peak years coincide with peak need, but with Australians taking on mortgages later and having children later, the timing isn't always aligned with reality.
For an example of how cover changes over a working life: at AustralianSuper a 32-year-old might have around $183,000 in default death cover; by age 59 the same automatic cover can drop to around $9,000.
Premiums reduce your retirement balance
Default premiums look low, particularly when you're young, but they're not free. They are deducted from your super balance every year, which means they're not earning compound investment returns. Over 30+ years, the difference is real.
TPD claims face two hurdles
TPD definitions inside super are limited to any occupation - meaning if you can work in any role you're reasonably suited to by education, training or experience, your claim may not be approved. A surgeon who can no longer operate but could theoretically teach may be denied.
Even if the insurer agrees to pay, the super fund has to release the money, which means meeting conditions of release. In practice, super funds rarely block payments the insurer has approved - but it's an extra layer that retail cover doesn't have.
Cover can stop without you noticing
If you stop working, your balance drops below a certain amount, or your account has not received contributions for 16 months, your fund can stop your cover entirely. This particularly affects people on parental leave, between jobs, contracting through a different fund, or who've stopped working altogether.
Opt-in windows when you join a fund
When you join a new fund, you may have to opt into insurance within a specific timeframe to avoid underwriting. The window varies by fund and cover type. Miss it and the no-medicals advantage of default cover may be gone.
Wondering whether your default cover is actually competitive at your age? We compared default cover from 10 of Australia's largest super funds against retail life insurance at ages 30, 40 and 50. See our super vs retail comparison to look at the cost of default cover and compare it to available retail policies.
When default insurance in super still makes sense
Default super cover isn't the wrong answer for everyone. It can be the right call when:
- You're young and building wealth - premiums are at their lowest, the cover gap matters less, and the simplicity is genuinely valuable
- You work in a high-risk occupation - fly-in fly-out, mining, trades involving heights or heavy machinery - where individually underwritten retail cover is either expensive or unavailable, group cover may be your only option
- You have a medical or family history that would trigger underwriting issues - if you've had a heart event, cancer, mental health treatment or significant family history, retail underwriting can be hard
- You already have retail cover and your default is costing you very little - there's no rule saying you have to opt out
In all these cases, some cover is meaningfully better than none.
When to look at alternatives
If any of the following apply, it's worth checking whether default cover is still the right fit:
- Your default cover feels too low - particularly against a mortgage or family financial obligations
- Premiums are climbing faster than you expected - common as you move into your 50s and the pooled risk re-prices
- You're in your 40s or 50s, or older - the level of default cover may not be sufficient, and retail policies may be materially cheaper
- A life event has changed your situation - buying a home, having a child, partnering up, becoming the primary earner
- You want cover that isn't available in super - trauma insurance, own-occupation TPD, indexation, child cover, or broader terminal illness features
- You've changed funds and didn't realise your cover didn't follow - or you've stopped working temporarily and want certainty your cover stays in place
Managing insurance in super
If you've decided default cover is the right call - or you're working out exactly what you've already got - here's how it actually works day to day.
What happens when you claim
Claims through super work a bit differently to retail. After the insurer assesses the claim, your super fund has to agree you meet the conditions of release before they can pay out. For TPD, that's typically permanent incapacity; for death claims, the fund decides who receives the money based on your binding nominations and the trust deed.
The process is generally slower than a retail claim, partly because two parties - the insurer and the trustee - are involved.
APRA and ASIC claims data for the year ending 30 June 2025 showed advised channels paid 97% of death claims compared to 98% for super-held cover. The wider point: both channels pay a very high proportion of death claims, but the structure and process are different.
Claims admittance rate by cover type and distribution channel
| Cover type | Individual Advised % admitted | Individual Non-Advised % admitted | Group Super % admitted | Group Ordinary % admitted |
|---|---|---|---|---|
| Death | 97% | 92% | 98% | 98% |
| TPD | 82% | 69% | 90% | 89% |
| DII | 94% | 86% | 96% | 98% |
One thing worth knowing about death benefits: super-held life insurance payouts are paid to your super account first, then distributed to your beneficiaries. Payouts to a spouse or dependant child are generally tax-free. Payouts to a non-dependant, such as an adult child, can attract tax of up to 32%. See the FAQ below for detail.
Premiums and cover over time
Two things drive default super premiums up:
Pooled risk. Group insurance prices groups of members in the fund as a single risk pool. Default cover is great for people in high-risk occupations and those with existing medical conditions - but as the pool ages, those risks materialise and premiums rise for everyone.
Age. Like all life insurance, default cover gets more expensive as you age. Most super cover uses stepped premiums, which start lower but rise every year, or they reduce the level of cover in order to reduce the increase in premiums. Retail policies often offer level premiums - these start higher but stay relatively stable until age 65, and can be more cost-effective if you hold the policy long-term.
Tax treatment
Insurance premiums paid through super are generally tax-deductible for the fund - but you usually don't see this as a refund or rebate. The fund handles the tax internally, which reduces the premium you pay rather than giving you a deduction at tax time.
If you hold income protection cover through super, the tax benefit is reflected in lower net cost. Outside super, income protection premiums are personally tax-deductible.
The short version from our super vs retail comparison: at 30, super usually wins on price. By 50, retail is often cheaper and better-featured. The 40s are where it gets situational.
Frequently Asked Questions
Is the payout from super-held life insurance taxable? +
It depends who receives it. Death benefits paid from super to a tax dependant - typically a spouse, de facto partner, or financially dependent child - are generally tax-free. Benefits paid to a non-tax dependant, including an adult independent child, can be taxed at up to 32% including the Medicare levy.
This is one reason retail life insurance held outside super is often preferred when the intended beneficiary is an adult child, parent, or sibling - payouts on retail policies are generally tax-free regardless of who receives them. If you're not sure who counts as a dependant in your situation, this is a question worth raising with an accountant or financial adviser.
Are there exclusions or waiting periods I should know about? +
Yes. The most common ones in default super cover are the 13-month suicide exclusion on life cover, pre-existing condition limits in the first 12-24 months, income protection waiting periods of 30, 60 or 90 days if IP is included, and takeover terms when moving from another fund. The detail is in the insurance booklet your fund publishes alongside the PDS.
Is life insurance in super tax deductible? +
Yes, indirectly. Premiums paid through super are tax-deductible at the fund level rather than deductible on your personal tax return. The fund passes the tax benefit through by reducing your premium, so you generally won't see a separate deduction at tax time. If you hold income protection through super, the fund deducts the premium and the tax benefit is reflected in lower net cost. Outside super, income protection premiums are personally tax-deductible.
What happens to my life insurance in super if I change jobs? +
Your default cover stays with your old super fund unless you actively close the account. If you start contributing to a new fund and stop contributing to the old one, the old fund may eventually cancel cover for inactivity, generally after 16 months without contributions. You can sometimes keep paying contributions into the old fund just to maintain cover, but you may be paying admin fees on two accounts and the cover may not match what you'd get under your new fund's default offer.
What happens if I change super funds? +
Your old fund's insurance does not transfer. You'd need to either opt into your new fund's default cover, if available, or take out separate cover. If you have any pre-existing health issues that would make new underwriting difficult, do not cancel your old cover until any new cover is fully in place.
Can I top up or change my default cover? +
Most funds let you apply for additional cover beyond the default level, subject to underwriting. The application is usually shorter than retail underwriting but isn't automatic. If you have health issues that might come up, compare both options before assuming extra super cover is easier.
Can I opt out of default super insurance? +
Yes. Every fund offers an opt-out, usually through the member portal. Before opting out, check whether you have alternative cover in place - and remember that re-applying later will usually require underwriting and your health may have changed.
How do I compare super cover to retail? +
We compared default cover from 10 major Australian super funds against retail life insurance at ages 30, 40 and 50. See the full super vs retail comparison for the details. The short version: at 30, super usually wins on price. By 50, retail is often cheaper and better-featured. The 40s are where it gets situational.
Does super cover include trauma insurance? +
No. Trauma insurance - cover for stroke, heart attack, cancer and similar major diagnoses - is not available inside superannuation. If you want trauma cover, it has to be held outside super.
What's the difference between TPD in super and standalone TPD? +
TPD held inside super is limited to the any-occupation definition - your claim is assessed on whether you can do any job you are reasonably suited to, not whether you can do your specific occupation. Retail TPD held outside super can be either any-occupation or own-occupation. We cover this in detail on TPD insurance in super.
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