Pre-existing medical conditions are a major consideration when assessing insurance inside superannuation. How a condition affects your cover depends on whether you have group (default) super insurance or individually underwritten cover.
Group Insurance and Pre-Existing Conditions
The default insurance you receive automatically when joining a super fund is group insurance — arranged by the fund trustee for all members collectively. One of the most valuable features of group insurance is that automatic acceptance cover does not require you to disclose your medical history.
This means:
- You can have conditions like diabetes, heart disease, or a history of cancer
- You receive the default cover regardless of your health history
- Pre-existing conditions are not automatically excluded from default group cover
However — the definition of what is covered in a claim is what matters. Even without automatic exclusions, some policies may have claim definitions that affect how pre-existing conditions are treated when you claim.
When Does a Pre-Existing Condition Matter?
1. Applying for Additional Cover (Above Default)
If you apply to increase your cover beyond the default amount, the fund’s insurer will ask you to complete a health declaration. At this point:
- You must disclose your full medical history
- The insurer can exclude specific conditions from the additional cover
- They can also decline to increase cover at all
Your default (automatically accepted) cover remains unaffected — only the additional cover you applied for is subject to the health declaration.
2. Switching to a New Fund
When you switch super funds, you typically lose your current insurance and must apply for cover at the new fund. This triggers underwriting:
- You must disclose pre-existing conditions
- The new fund’s insurer can exclude conditions from your cover
- In some cases, cover may be declined for high-risk conditions
Critical: Before switching funds, check the new fund’s insurance terms — particularly if you have a pre-existing condition. The default cover at the new fund may be automatic acceptance up to a limit, but you must check the specific policy.
3. Reinstatement After Cancellation
If your insurance was cancelled (e.g., under the Protecting Your Super inactivity rules) and you want to reinstate it, you typically need to reapply. This triggers medical underwriting.
Definition of Pre-Existing Condition in Insurance Policies
Retail and some super insurance policies define a pre-existing condition as:
A condition, illness, or symptom that you were aware of — or a reasonable person in your circumstances should have been aware of — before the policy commenced
The exact definition varies by policy. Read your fund’s Insurance Guide carefully.
Strategies for Members With Pre-Existing Conditions
- Keep your existing default cover: If you have a pre-existing condition and automatic default cover, don’t cancel it — reinstatement will require underwriting
- Don’t switch funds without checking: Losing automatic acceptance cover at your current fund to trigger underwriting at a new fund can leave you underinsured
- Notify your fund of any changes to your health: Some conditions require you to tell your fund — failing to disclose can affect claim outcomes
- Consider retention over premium saving: For members with complex health histories, the value of existing group cover may outweigh the premium savings from cancelling or switching
What to Do If a Claim Is Denied Due to Pre-Existing Conditions
If a claim is denied on the basis that the condition was pre-existing:
- Request the full denial letter and the specific policy definition used
- Lodge an internal dispute with the fund (IDR)
- If unresolved, contact AFCA (Australian Financial Complaints Authority) — free, binding, and handles many pre-existing condition disputes
- Consider engaging an insurance lawyer if the amount is significant
AFCA has overturned many insurer decisions where the pre-existing condition definition was applied too broadly.
For more: Death Cover in Super, Group vs Retail Insurance, Super Insurance Claims, Opt Out of Super Insurance. For advice on your situation, speak with a licensed financial adviser via MoneySmart.