InsuoraLife insurance in Australia: what you need to know
Life insurance in Australia comes in two forms: super-linked cover (held inside your superannuation fund) and standalone policies (purchased directly from an insurer or broker). Most Australians have their first layer of cover through super automatically — but super default amounts are frequently insufficient for families with mortgages and dependants.
Types of personal insurance in Australia
- Term Life / Death Cover
- Pays a lump sum to your beneficiaries if you die. Can be held inside super (where premiums are paid from your super balance) or outside super (where premiums are paid from take-home pay but may be tax-deductible for the self-employed).
- Total and Permanent Disability (TPD)
- Pays a lump sum if you become permanently unable to work due to illness or injury. Inside super, 'any occupation' TPD is common; outside super, 'own occupation' definitions are available and more generous. This calculator covers death cover only.
- Income Protection
- Replaces up to 70% of your income (for agreed-value policies, now mostly phased out) or 70% of pre-disability income (for indemnity policies) if you cannot work temporarily. Usually held outside super for tax reasons (premiums are generally tax-deductible). The maximum benefit period is typically 2 years, 5 years, or to age 65/70.
- Trauma / Critical Illness
- Pays a lump sum on diagnosis of a specified serious condition — cancer, heart attack, stroke, etc. — regardless of whether you can work. Must be held outside super. Useful for funding treatment costs, rehabilitation, or lifestyle adjustments.
Super-linked life insurance: the gap problem
Most Australian super funds automatically enrol members in default death cover. The default amount varies enormously between funds — from as little as $100,000 to over $600,000. Critically, default cover is almost always fixed rather than tailored to your needs.
Consider a family scenario: two parents, two children under 10, a $700,000 mortgage. If one parent dies, the surviving spouse needs to continue servicing the mortgage, fund childcare or school fees, and maintain living standards on one income. A default death cover of $250,000 covers less than half the mortgage — leaving the family acutely exposed. This is the gap that this calculator is designed to reveal.
Log in to your super fund to check your current cover amount and the annual premium being deducted from your balance. Many funds allow you to adjust your cover level through their online portal — often without medical underwriting up to certain limits, especially when you are young.
Super death benefit tax
When a super fund death benefit is paid to a tax dependant (spouse, partner, children under 18, or anyone financially dependent on you), the entire payment is generally tax-free as a lump sum. When paid to a non-dependant adult child (over 18 and financially independent), a 15% tax applies to the taxable component of the super balance.
Life cover held inside super generally does not form part of your estate — it is paid directly by the fund to your nominated beneficiary (either binding or non-binding nomination). Standalone cover paid to a named beneficiary also does not form part of your estate. Both are therefore not subject to estate administration delays.
Frequently asked questions
- Is this calculator free?
- Yes — completely free, no account needed. Everything runs in your browser and nothing you enter is saved.
- Should I hold life insurance inside or outside super?
- Inside super: premiums are paid from your pre-tax super balance, which can be cost-effective if cash flow is tight. Downside: reduces your retirement savings, and death benefits paid to non-dependant beneficiaries attract tax. Outside super: premiums are paid from after-tax income (though self-employed people can deduct them), the full benefit passes to any nominated beneficiary tax-free, and you have access to 'own occupation' TPD and trauma cover (not available inside super). Most advisers recommend a hybrid approach.
- What happens to my super life cover if I change jobs?
- Your super account follows you when you change employers (provided you keep the same fund). However, if your employer defaults to a different fund, your new account may have different default cover — and your old cover may lapse if your old account goes inactive. Since 2021, the ATO's super consolidation rules mean inactive accounts with low balances can be transferred to the ATO, potentially cancelling your cover. Always consolidate super accounts consciously and check insurance implications before doing so.
- How do I make a life insurance claim in Australia?
- For super-linked cover: notify your super fund (the trustee assesses the claim and manages payment). For standalone policies: contact the insurer directly with a certified death certificate, claim form, and identification documents. For both: insurers are required to process claims within regulated timeframes. ASIC and AFCA (Australian Financial Complaints Authority) regulate insurer conduct and can assist if a claim is disputed or delayed.