Should I have my life insurance through my superannuation fund?

Life Insurance

Most superannuation funds offer their members a level of life insurance cover so you may wonder why you would bother with a separate policy. The simple answer is it depends on your personal circumstances. You have the choice to stay with your super fund insurer or cancel and take out your own policy. We’ll examine the pros and cons of having a separate life insurance policy outside of superannuation.

Pros of a Separate Life Insurance Policy

More Say in your Policy

Life insurance policies through superannuation funds are a ‘one size fits all’ approach because they are bought in bulk. With a separate life insurance policy, you can make choices on some flexible options including:

  • The level of cover / sum insured you require to pay out debts and provide dependents with a lump sum for future expenditure ie education.
  • Choose Fixed or stepped cover

The average policy covers 75% of your salary for an agreed period if you are unable to work due to illness or accident however you can request one that pays a higher percentage of your salary. The benefit period can be between 2 years and 70 years so you decide what’s best for you.

Designed for your Circumstances

With a separate life insurance policy, you can ask a financial advisor to customise your policy to suit your circumstances. You may need one that takes into account your business, high level of debt, a pre-existing condition or policy termination if you are close to 65 years. Your financial advisor can assess you and your family’s circumstances and find the right policy for your stage of life at the right price.

Preserve your Super Funds

If you have life insurance outside your superannuation, all of the funds invested in your fund stay in super. Over the years those insurance premiums add up plus you have lost the benefit of compounding returns, so your final super balance may fall short of what you need to live a comfortable retirement.

No Change to your Policy when you Move Jobs

When you change your employer, more often than not, you move superannuation funds. You can then end up with a few superannuation policies and paying for various insurance premiums, thus eating away your retirement savings further.. With an outside life insurance policy, nothing changes if you change employment or superannuation funds.

Time to Make a Claim

If you need to claim on your life insurance policy and you bought it through a financial advisor or broker, you can leave it them to handle all of the paperwork and liaison with the insurance company. It’s one of the most stressful times of someone’s life when they are grieving for their partner or dealing with a life-threatening illness or life-changing accident. Having someone who can handle it all for you and ensure the funds are paid to you promptly, will help with some of the stress.

Cons of a Separate Life Insurance Policy


Due to your super fund purchasing your life insurance cover in bulk, your cover is likely to be discounted. Purchasing a separate policy may have a higher premium.

Automatic Deduction

Life insurance inside superannuation is paid directly from your superannuation contributions. With an outside policy, you will need to pay the premium from income rather than your superannuation contributions.


You will receive a few extra letters in the mail because your life insurance is separate to your superannuation however it acts as a good reminder to review your policy and make any changes.


Not all life insurance companies require one, but some insurers may request you have a medical before you take out a policy. With super insurance policies, in most cases a medical isn't required.Which at the end of the day, having provided a medical report will help in the time of a claim.

Life insurance is one policy we don’t want to make a claim, but if the worst happens, you want your family's financial security covered. It’s a matter of weighing up what you need from your policy and deciding what is the best option for you. During a time of stress or grief, you want the peace of mind that your financial situation is sorted.

If you want help reviewing your current life insurance policy whether it’s through your superannuation fund or a separate insurer, contact one of the experienced Knightcorp Financial Advisors on 1300 656 001 or email

Category: Life Insurance