Is it a good idea to pay for your insurance from super?

We get asked this question a lot, and is often the case: the answer is ‘it depends’.

Cover that can be paid from super

  • Life insurance

  • Total and Permanent Disability (Any occupation)

  • Income Protection (Basic cover).

Cover that cannot be paid from super

  • Total and Permanent Disability (Own occupation)

  • Income Protection (Comprehensive cover).

  • Trauma Insurance

  • Business insurances

So why can some cover be paid from super, and not others?

When you fund your premiums from super your fund “owns” the policy.

As the policy owner when the insurance pays out, it pays into the fund – therefor to access the money from the fund you need to meet a ‘condition of release’ such as retirement, terminal illness or total and permanent disability (as defined in super law).

If you held your Trauma policy in Super, and you got cancer – you may not be disabled or terminally ill, which means the insurance would pay out – but the money would be locked up in Super.

Income protection has a small exemption, but the definitions allowed on super policies are limited and often not that strong from a claims perspective – Click to see our article on quality income protection.

The pros and cons of paying via super


  • Premiums can be more manageable due to premiums being deducted from your balance rather than your bank account.

  • Lower chance of your policy lapsing if you lose your job or cash flow becomes tight meaning you protect yourself for longer.

  • There can be tax benefits to holding insurance in super depending on the type of cover held, how it is structured and whether or not you implement strategies such as salary sacrificing.

  • You can direct that cash flow to other goals such as reducing debt, reducing your long term need for cover.


  • Group cover (such as through industry funds, employer funds, automatic cover) can often be cancelled at any time.

  • You are still paying for the premiums, they will cause you to have less super which can hurt your retirement in the long run!

  • IF the beneficiary of the life insurance is not a ‘tax dependant’ there can be tax implications on the benefit.

  • The definitions can be limited, making claiming on the insurance much harder.

What can you do?

Seek advice (of course) to see the best way to structure your insurance based of your needs and circumstances.

There are a number of strategies that can be out in place to minimise the effects of insurance on your situation, including topping up super or linking policies in/out of super.

DISCLAIMER: The information contained within our website is of a general nature only and has been provided without taking account of your objectives, financial situation or needs.

Because of this, you should consider, with or without the assistance of a financial adviser, whether the information is appropriate in light of your particular needs and circumstances.

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