Is Life Insurance Through Super Eating Into Your Retirement?

🕳️ The silent drain most Australians ignore🔗

Over 9 million Australians have death cover through super, and over 8 million have TPD cover, according to APRA data. That's a lot of people paying for something they've likely never consciously chosen to keep.

The insurance itself isn't the problem. The problem is the compound growth you silently give up every year those premiums leave your account. Money deducted in year one doesn't just disappear, it's money that would otherwise have kept growing for every year remaining until retirement.

🧮 The maths that will make you sit up🔗

Take an illustrative combined death and TPD premium of around $575 a year. Run the future value of that as an annuity, what it would have grown to if it had stayed invested in your super at a 7% annual return instead.

📈 Premiums are going up🔗

This cost isn't static either. AustralianSuper, Australia's largest fund, increased its insurance costs from 30 May 2026, death cover up 20%, TPD up 40%, and income protection on a 2-year benefit period up 38%, attributing the rises to higher claims over the past year, particularly for mental health. Other funds are facing similar pressure. If a 40% TPD increase sounds abstract, run it through the same 30-year compound formula and you're looking at meaningfully more lost retirement savings from that cover alone.

🤔 So why does insurance through super exist?🔗

Because for millions of Australians it's genuinely valuable, and they'd have nothing without it. Group buying power means funds negotiate cover for hundreds of thousands of members at once, at premiums typically well below an equivalent retail policy, and usually without a medical exam, a real advantage for anyone with a pre-existing condition.

When it works, it works well. Average death and TPD payouts through super have both run well over $130,000 in recent years, for someone with a mortgage and young kids, that's the difference between their family keeping the house or not. Curious what actually drives those payouts? Our look at the most common TPD claims in Australia breaks down the real-world patterns.

✅ When keeping it makes sense🔗

• You have financial dependants, a partner, kids, or anyone who relies on your income
• You have significant debt, like a mortgage, that would fall on someone else
• You have no real savings buffer
• You work in a dangerous occupation with statistically higher TPD risk
• You couldn't easily get retail cover due to a pre-existing condition
• You're in your 30s or 40s with a growing family, typically when the stakes are highest

Not sure how your current default cover stacks up against what your family would actually need? Our life insurance calculator works out a realistic figure based on your debts, dependants and income.

🚪 When opting out makes sense🔗

• You're young with no dependants and minimal debt
• Your balance is low and premiums eat a meaningful share of your annual contributions
• You have duplicate cover through an employer or a separate retail policy
• You have substantial assets and are effectively self-insured
• You're approaching retirement, when death cover typically ends around 70 and TPD around 65

🎯 The essential: If you opt out and later want back in, you may need to go through medical underwriting. Don't cancel impulsively, think it through first, and see our super vs standalone comparison before deciding.

📜 The rules you need to know🔗

If you're under 25 and open a new super account, insurance isn't automatically included, you have to opt in. If your balance is under $6,000, the same applies. If your account hasn't received contributions for 16 months, your fund must cancel your insurance unless you actively elect to keep it. And since stapling began in November 2021, your existing account generally follows you to a new employer rather than a new default fund opening automatically.

❓ Frequently asked questions🔗