Most Australians have insurance in their super fund automatically — and many have no idea what it costs or whether they actually need it. Here’s how to think about whether to opt out.
What Opting Out Means
If you opt out of insurance in your super fund:
- Premiums stop being deducted from your super balance
- Your account grows faster (without the insurance drain)
- You lose the insurance protection
You can typically opt out of:
- Death cover (life insurance)
- TPD cover (total and permanent disability)
- Income protection (if included in your default package)
You can opt out of all or some of these. Most funds allow this via their online portal or a simple form.
How Much Is Super Insurance Costing You?
Premiums are often small individually but compound over time. For a 30-year-old, a common default package might cost $5–$15/week — $260–$780/year. By 50, premiums typically increase significantly as age-based rates rise.
Impact on retirement balance:
| Annual premium | Invested at 7% p.a. | Lost balance after 30 years |
|---|---|---|
| $500 | Compounded to ~$47,000 | |
| $1,000 | ~$94,000 | |
| $2,000 | ~$188,000 |
The insurance is not “free” — it has a real cost to your retirement savings.
When Opting Out May Make Sense
1. Young, single, no dependants, no significant debt If no one financially depends on you and you have no large debt, life insurance/death cover has limited value. If you die, there is no financial harm to dependants.
2. Already well-insured elsewhere If you hold retail IP, life insurance, or TPD outside super that covers your needs, additional super insurance may be duplicating cover.
3. Very small super balance Premiums deducting from a small balance can exhaust the account and trigger the ATO “protect your super” inactive account transfer. For small balances under $6,000, insurance can destroy the account.
4. Self-insured through wealth If you have substantial other assets (investment portfolio, paid-off property), the need for traditional life insurance may be lower.
When You Should NOT Opt Out
1. You have dependants who rely on your income Life (death) cover is most valuable when people depend on your earnings — spouse, children, or other financial dependants. Without it, your death leaves them financially exposed.
2. You have a large mortgage or debt Life and TPD insurance helps ensure your debt doesn’t become a crisis for your family if you die or become disabled.
3. You have no other income protection IP is particularly valuable if you are employed without substantial sick leave or financial reserves. Without it, an extended illness or injury could wipe out your savings.
4. You have a pre-existing condition that would exclude retail cover Group super insurance often covers pre-existing conditions that retail policies would exclude (especially for default cover). If you have health issues, retaining your group cover may be your only option.
How to Opt Out
- Log in to your super fund’s member portal
- Navigate to Insurance or Cover
- Reduce or cancel the specific insurance type
- Some changes require a signed form — download and return if prompted
You can typically reverse the decision later — but reinstating cover after opting out may require medical underwriting (health disclosure).
The Restart Risk
If you opt out and later develop a health condition, reinstating cover may be difficult or expensive. If the fund offers guaranteed renewability (a common feature), opting back in while healthy protects future insurability.
For more: Death Cover in Super, Income Protection in Super, TPD in Super, Protecting Your Super Reforms, Super Insurance Explained. For advice on your situation, speak with a licensed financial adviser via MoneySmart.