How does insurance inside super work?
Life is pretty unpredictable. If something unexpected happens, you want to have insurance in place to minimise the financial impact on you and your loved ones.
When it comes to life, disability, and income protection insurance, there are generally two options you can choose from: have insurance cover inside your super or pay for a separate insurance policy outside your super. We’ll go through some of the benefits and things to consider when choosing insurance inside super so you can decide whether it’s right for you.
On this page
- What types of insurance cover are available in FirstChoice?
- Should you have insurance inside super?
- How do you know how much insurance you need?
- Applying to increase your insurance cover
- How to reduce or cancel your insurance cover
- Transferring insurance from another super fund or life insurance company
- How to make an insurance claim
- Why was my insurance cancelled?
What types of insurance cover are available in FirstChoice?
Type of insurance
What does it cover?
Type of insurance
Death (including terminal illness) cover (also known as life insurance)
What does it cover?
Death (including terminal illness) cover (also known as life insurance)
It may pay a lump sum if you die or are diagnosed with a terminal medical condition.
Type of insurance
Total and Permanent Disablement (TPD) cover
What does it cover?
Total and Permanent Disablement (TPD) cover
It may pay a lump sum if you're unlikely to ever work again due to illness or injury.
Type of insurance
Salary Continuance Insurance (SCI) – also known as Income Protection cover
What does it cover?
Salary Continuance Insurance (SCI) – also known as Income Protection cover
It may provide a monthly income payment if you stop work due to illness or injury. Depending on your cover, it could also pay super guarantee contributions to your super fund.
Automatic insurance cover for FirstChoice Employer Super members
If you join CFS through your employer, you may be eligible to receive automatic (default) insurance cover. Our FirstChoice Employer Super insurance key facts sheet will help you understand and compare the automatic insurance cover available to eligible members.
Should you have insurance inside super?
There are plenty of benefits to having insurance inside super, but it’s important to be across the potential limitations as well.
Benefits of having insurance inside super
- Easier to pay - Your premiums are automatically deducted from your super, so you don’t have to budget for them with your take-home pay.
- Competitive premiums - Super funds negotiate with insurers to get competitive bulk rates for their members, which means your premiums will likely be lower compared to a non-super insurance policy.
- Fewer health checks - Depending on how you join the fund and your eligibility, you may receive a default level of cover without health checks.
- Better tax outcomes - Paying for insurance through your super may be tax-effective, but this depends on your personal circumstances (e.g. your marginal tax rate, contribution type and contribution amounts).
Potential limitations of having insurance inside super
- Premiums reduce your retirement savings - Insurance premiums are paid from your super account, which reduces the amount of money your super can invest in and your savings for retirement.
- Cover can end - If you change super funds and your contributions stop, your cover may end if you don’t tell us you want to keep it and no money is received into your account for 16 continuous months. Cover can also end if you don’t have funds to pay for it.
- Limited level of cover - The level of cover you can get in super is often lower than the cover you can get outside super. Default cover through super also isn't specific to your circumstances and eligibility requirements apply.
- Payouts could be taxed - Generally, insurance payouts outside of super are not taxed. However, TPD and life insurance proceeds received from your super fund may be taxed depending on your or your beneficiary’s circumstances.
How do you know how much insurance you need?
Check your super statement or app to find out if you have existing insurance cover and how much cover you have. If you’ve had insurance cover automatically provided to you, it may not be the right amount for your needs. We offer flexible options to dial your cover up or down if your current level of cover needs to be adjusted.
The level of insurance you may need depends on many factors. This can include whether you:
- are single or in a relationship
- have children who are financially dependent on you
- own your home outright (or are paying rent or a mortgage)
- have outstanding debts
- have substantial recurring expenses (such as school fees)
- have other sources of income that would be sufficient to cover your expenses and liabilities.
One of the best ways to estimate your life insurance needs is to use the Moneysmart life insurance calculator t’s easy to use and will only take you a few minutes.
For other types of insurance, and a more comprehensive view of your overall insurance needs, it’s best to speak with a financial adviser.
Keep in mind that your insurance needs will probably change several times throughout your life, so it’s a good idea to review your insurance regularly, and after any big life events.
Applying to increase your insurance cover
You can decrease or cancel your insurance cover at any time, but if you want to increase your cover you will have to apply for it. This usually involves providing evidence of your current health, occupation, income and lifestyle. The insurer may accept or decline your application.
You’ll find the insurance application form in the insurance guide for your super product:
Once you’ve completed and signed the application form, upload it through our online portal along with any attachments, or mail it to us at the address written on the form.
If you’re a FirstWrap or CFS Edge member, your financial adviser can help you increase your insurance cover.
Increasing your insurance cover after a big life event
If you already have insurance cover and you experience a big life event (e.g. getting married or having children), you can apply to increase your cover within 120 days of the life event occurring without having to provide any extra medical evidence.
Limits and other eligibility requirements apply. Check the insurance guide for your super product for more information:
How to reduce or cancel your insurance cover
It’s not mandatory for you to have insurance inside your super account or to keep the same amount of cover you currently have. You always have the option to reduce or cancel your cover as your insurance needs change.
You can do this by:
- calling, emailing or writing to us
- logging into our online portal
- completing the Reduce or Cancel Insurance Cover form.
What to consider before reducing or cancelling your insurance
You may want to consider getting financial advice to help you work out whether reducing or cancelling your cover is the right decision for you.
If you cancel your cover:
- you and your beneficiaries won’t be able to make an insurance claim for any illness that presents or injury that occurs after the cancellation date.
- you might not be able to get cover again later. This is because you’ll need to apply and provide detailed health information to the insurer for assessment.
Transferring insurance from another super fund or life insurance company
If you have insurance cover with another super fund, or you have an external life insurance policy, it may be possible to transfer your insurance cover to your FirstChoice account.
It’s important that you don’t cancel your previous cover until you receive written confirmation from us that your transfer request has been accepted.
Keep in mind that:
- your transfer request is subject to eligibility and the insurer’s acceptance of your request
- the terms, conditions and premiums will generally be different to your previous insurance cover
- there are limits on how much cover you can transfer.
Here are the steps you need to follow if you want to transfer your insurance to your FirstChoice Wholesale Personal Super or FirstChoice Employer Super account. If you’re a FirstWrap or CFS Edge member, your financial adviser can arrange this transfer for you.
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Download and complete the transfer of insurance cover form.
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Return the form to CFS.
Upload your completed form to our online portal along with any attachments.
Or, you can mail them to us using the address on the form.
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Wait for our confirmation before cancelling your other insurance cover.
We’ll update you as your application progresses and contact you if there’s any incorrect or incomplete information.
How to make an insurance claim
We understand that if you’re making an insurance claim, it means you’re probably going through a difficult time. We make sure all genuine claims are assessed and approved as quickly as possible to help relieve some of the burden.
Here’s a step-by-step guide to making an insurance claim and information about how we’ll handle your claim:
Why was my insurance cancelled?
If you have insurance inside your FirstChoice account, we’ll have to cancel your cover when one of the following events takes place:
- you reach the cover expiry date
- we haven’t had any contributions going into your super account for 16 continuous months (unless you tell us that you want to keep your insurance cover)
- you don’t have enough money in your super account to pay your full monthly premiums (you will usually get 90 days after your account balance becomes too low to cover the full monthly premium before your cover is cancelled)
- you are no longer a member of the super product
- you die
- the date the policy terminates/ends
- you request to cancel your cover
- the date a terminal illness benefit becomes payable
- the date a TPD benefit becomes payable but only where death cover is reduced to nil (otherwise any death cover above the TPD benefit will continue).
You can read about these conditions in more details in the relevant insurance guide:
What’s next?
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Things you should know
Avanteos Investments Limited ABN 20 096 259 979, AFSL 245531 (AIL) is the trustee of the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557 and issuer of FirstChoice range of super and pension products. Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (CFSIL) is the responsible entity and issuer of products made available under FirstChoice Investments and FirstChoice Wholesale Investments.Information on this webpage is provided by AIL and CFSIL. It may include general advice but does not consider your individual objectives, financial situation, needs or tax circumstances. You can find the target market determinations (TMD) for our financial products at www.cfs.com.au/tmd, which include a description of who a financial product might suit. You should read the relevant Product Disclosure Statement (PDS) and Financial Services Guide (FSG) carefully, assess whether the information is appropriate for you, and consider talking to a financial adviser before making an investment decision. You can get the PDS and FSG at www.cfs.com.au or by calling us on 13 13 36.