Insurance inside super: the cover you already have

Most super funds automatically attach insurance to their accounts. As Moneysmart's guide sets out, the usual default bundle is three covers: life cover (also called death cover), which pays your beneficiaries if you die; total and permanent disability (TPD) cover, which pays if you can no longer work; and income protection (salary-continuance) cover, which replaces part of your income through a long illness or injury.

The mechanism that makes it invisible: premiums come out of your super balance, not your take-home pay. Nothing hits your bank statement, no renewal notice lands in your letterbox — the cost simply leaves the account you look at least. For plenty of people that's a feature, not a bug: the cover exists precisely because nobody had to remember to buy it.

But invisible costs deserve a yearly glance more than visible ones. The place to look is your fund's app, your annual statement, and the insurance section of the product disclosure statement: what covers you hold, how much they'd pay, and what they cost. Five minutes — and for many people it's the first time they've ever seen the number their family would receive.

Insurance through super has genuine advantages, and Moneysmart lists them plainly: group purchasing can make it cheaper than equivalent cover bought directly, and it's usually issued without medical checks — which matters enormously if your health history would make personal cover expensive or unavailable. Paying from super also eases cash-flow when the household budget is tight.

The catch is in the word default. The cover was sized for a statistical member, not for you: Moneysmart's blunt caution is that default cover may be less than you need. A single renter with no dependants may be paying for life cover they have little use for; a parent with a mortgage may be badly underinsured while feeling "covered" because something exists.

And the premiums have a second cost: every dollar leaving your balance also leaves the market, giving up its future compounding — the same arithmetic as super fees, and precisely what the projector below shows. None of this says cancel; it says decide. Insurance you chose at a price you've seen is a plan. Insurance you've never looked at is just a leak with a maybe attached.

The law now protects balances from being eaten by unnoticed premiums — which means cover can vanish exactly when you weren't looking. By law, funds must cancel insurance on accounts that go without contributions for an extended period (the current cut-off is on Moneysmart's page), unless you tell the fund you want to keep it. A career break, parental leave, or simply switching jobs and leaving an old account idle can quietly switch your family's cover off.

Cover also doesn't start automatically for everyone: younger members and low-balance accounts generally don't get default insurance unless they ask for it — the age and balance lines live at the source. If you're young with dependants or debts, "I have super" does not mean "I have cover".

The third trap hides inside good advice. Consolidating duplicate accounts is usually smart — multiple accounts can mean paying premiums on multiple policies, as Moneysmart notes — but insurance dies with the account it's attached to. Close the old account first and the replacement cover may be harder or dearer to get (age and health have moved on). The order matters: confirm the cover you're keeping before closing the account you're leaving.

The good news: this is a once-a-year job, not a hobby. Start by finding everything you hold — each fund's app or statement shows the covers and premiums, and your myGov super view catches accounts you'd forgotten. You can't size what you haven't listed.

Then size the cover to your actual life, not the default's guess. The questions are blunt: who depends on your income, what debts would land on them, and for how long would they need support? A young single with no debts needs little life cover; a single-income family with a mortgage may need much more than any default provides. Funds let you increase, decrease or cancel cover — and the earlier in life you adjust upward, the easier it tends to be.

Finally, fix the drag: cancel duplicate policies you'll never claim twice on, and check the premium against the cover it buys. If your circumstances are complicated — health history, self-employment, blended families — this is a genuinely good moment for licensed personal advice; insurance is the corner of finance where the cheap generic answer is most often the wrong one.