Personal Insurance Inside Your Super

Personal Insurance Inside Your Super

Personal insurance is one of the best ways to protect your family in case you get hurt or become sick. You can choose what type of insurance you need, how much cover you want, and whether to hold your premiums inside or outside your superannuation fund. All types of insurances can be held outside your super, but there are three types of Personal Insurance Inside your Super:

  1. Income protection – pays you a monthly benefit to replace your income if you are unable to return to work due to injury or illness.
  2. Total Permanent Disablement (TPD) cover – pays you a lump sum benefit if you are unable to return to work due to a permanent disability caused by illness or injury.
  3. Life insurance – pays a lump sum benefit to your nominated beneficiaries in case you die.

Deciding whether to have your personal insurance inside or outside your superannuation can be a complex decision. Therefore, we have listed all of the pros and cons of both options in order to help you decide.

Why Hold Personal Insurance Inside Your Super?

As mentioned above, most super funds allow income protection, TPD and life insurance. Make sure that your personal insurance is sufficient to cover the risks of your job.


  • Life insurance and TPD cover are tax-deductible to the super fund, and your premiums may be paid in part or in full with pre-tax money.
  • It is easier to manage premiums because they are automatically deducted from your super balance.
  • Many employer super funds offer cost-effective group insurance
  • Some super funds have automatic approval.


  • Since premiums are paid from your superannuation savings, you will have less retirement money.
  • If you change employers or start your own private practise, there is no guarantee that your insurance cover will stay the same, and you might have to apply for new insurance
  • Death and TPD benefits may be taxable.
  • The payout may be slow, considering that the fund gets paid first by the insurance before the beneficiaries.
  • If there is no beneficiary or your fund has no binding nominations, the super trustee will have the preferred right to choose who gets to receive the benefits upon your death.
  • Life insurance cover ends when you reach the age of 65 or 70, depending on your super.

Why Hold Personal Insurance Outside Your Super?

All types of personal insurance are available outside the superannuation.


  • Income protection is tax-deductible outside of your super.
  • You are able to receive benefits right away because they are paid directly to you.
  • Life insurance and TPD benefits are tax-free.
  • You can continue keeping your insurance cover even if you decide to change jobs or start your own private practise. If you plan to quit your job and work for another employer, take a sabbatical, start your own private practice, or move overseas, you might be better off keeping your personal insurance outside your super.


  • Your premiums are paid with post-tax dollars if you keep your life insurance and TPD cover outside the superannuation fund
  • You may be asked about your medical history as a prerequisite for approval

Need Help Deciding Which Path to Take? Makes Cents is Here For You.

Whether you hold personal insurance inside or outside of your super ultimately depends on your individual circumstance. If you need help understanding the fine print of your insurance policy or want to compare the different options available to you, please contact MakesCents. Our insurance and finance experts may be able to answer your enquiries so you can better, more sound decisions.

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