Super funds with the lowest income protection insurance premiums

Paying too much for income protection insurance inside your super fund can cost you dearly, eating into your retirement savings without necessarily improving your cover.

Income protection (IP) insurance (sometimes called salary continuance insurance) is available through some super funds as default cover. It is one of three kinds of insurance available inside super, alongside life and TPD, but it is the least common (and most expensive).

What does income protection cover?

Income protection insures against the risk that you are unable to earn an income for a specified period (this might be two years, five years or up to a certain age) due to an injury or illness. However, IP does not cover you for redundancy.

Super funds vary in their terms and conditions, but generally you can get IP if you are under age 65 and at least age 15.

The maximum amount you can insure is 85% of your pre-tax (and pre-disability) salary, or up to a monthly figure of $25,000 or $30,000 typically. That 85% would include an amount for super, which would be paid into your super account, while the rest of the benefit is paid to your bank account.

Understand your existing cover

There have been big changes to insurance in super over the past four years, with a flurry of legislation including the Protecting Your Super and Putting Members’ Interests First.

This followed findings by the Productivity Commission and others highlighting a high number of unintended or duplicate policies and a general lack of awareness by fund members about the type and level of cover held.

Following these legislative changes, research by KPMG forecast that fewer members holding insurance cover would push up premiums for everyone else by up to 26%. Unfortunately, they were right.