Insurance Inside Super Vs Outside

Insurance Inside Super Vs Outside is an insurance policy held within a superannuation fund, while insurance outside super is a policy held outside of a super fund. When considering insurance options, it’s essential to understand the difference between insurance inside super and insurance outside super.

To put it simply, insurance inside super refers to an insurance policy that you take out through your superannuation fund, while insurance outside super is a policy that’s held separately. There are various factors to consider when choosing between insurance inside super and insurance outside super.

It’s important to consider factors such as cost, coverage, and flexibility. In this article, we’ll explore the key differences between insurance inside super and insurance outside super, as well as the pros and cons of each option to help you make an informed decision.

Insurance Inside Super Vs Outside


Table of Contents

What Is Insurance Inside Super And Outside Super?

Definition Of Insurance Inside Super

Insurance inside super refers to life insurance, total permanent disability (tpd) and income protection insurance held within a superannuation fund. It is designed to protect your loved ones and provide financial security in the event of unexpected illness, injury, or death.

Insurance inside superannuation is offered by most super funds, and it is usually more affordable than buying standalone policies outside of super.

Definition Of Insurance Outside Super

Insurance outside super, on the other hand, is a policy purchased outside of a superannuation fund, covering life insurance, tpd or income protection. These policies can be tailored specifically to your individual needs and circumstances and allow you to choose the level of coverage.

You can purchase them directly from insurance companies or through a financial advisor.

Difference Between Insurance Inside Super And Outside Super

There are several differences between insurance inside super and outside super, including:

  • Ownership: Insurance inside superannuation policies are owned by the super fund, while policies purchased outside of super are owned by the individual.
  • Affordability: Insurance inside super usually has lower premiums as the super fund buys in bulk and passes on the savings to members. Outside super insurance, on the other hand, can be more expensive.
  • Flexibility: Policies purchased outside of super can be tailored to the individual’s needs, while insurance inside super has limited options that are typically set by the super fund.
  • Taxation: Insurance held within super can offer tax benefits that vary depending on the policy and the fund. If the member holds the policy for more than 10 years, they may receive deductions on premiums paid. Policies purchased outside super may offer different tax benefits or deductions.

Deciding whether to opt for insurance inside super or outside super depends on personal circumstances. It’s therefore important to consider your goals, budget, and the level of coverage you require to make an informed decision.

Benefits And Drawbacks Of Insurance Inside Super

Insurance is an essential aspect of financial planning that provides coverage in case of any unexpected events. One way to get insurance coverage is through a superannuation fund, which can either be inside or outside super. We will discuss the benefits and drawbacks of insurance inside super, focusing on three key areas.

Lower Premiums Due To Group Discounts

Getting insurance coverage within super comes with certain benefits, one of which is the reduced premium cost. It is due to the fact that superannuation funds offer group discounts to their members, which makes insurance more affordable. These lower premium rates also help people to retain more of their income for other financial goals.

Automatic Coverage Due To Default Insurance Offered By Superannuation Funds

One of the significant advantages of having insurance inside super is the automatic coverage offered to the fund members. Super funds generally provide default insurance to their members without requiring any medical tests or questionnaire. This feature ensures that policyholders have at least a minimum level of cover without the need for a comprehensive underwriting process.

Convenience And Ease Of Managing Insurance Within Super

Another benefit of having insurance inside super is the convenience and ease of managing it. By having insurance and super in the same place, policyholders can easily monitor and manage their insurance policy through their existing online portal. They can also make changes to their coverage without requiring additional paperwork or visits to the insurance office.

However, having insurance inside super can also have some drawbacks that must be considered before making a decision.

Limited Benefit Coverage Due To Default Insurance

One of the main drawbacks of insurance inside super is the limited coverage offered by default insurance. The super fund’s default insurance may not provide enough coverage for specific medical conditions or professions, which could be a significant disadvantage for those who require additional coverage.

Limited Options For Customizing Insurance Coverage

Another limitation of insurance inside super is the limited options for customizing coverage. Fund members have less flexibility in choosing their insurance policy’s terms and limits, which may not suit everyone’s specific needs.

May Not Be Adequate For Certain Professions Or Medical Conditions

Lastly, insurance inside super may not be suitable for specific professions or medical conditions. For example, people working in hazardous occupations may require additional specific coverage, which may not be available in the super fund’s default insurance policy.

Insurance inside super can be a good option for those seeking an affordable and straightforward way to get coverage. However, it may not be suitable for everyone. Therefore, it is crucial to weigh the advantages and drawbacks before deciding whether to opt for insurance inside super or not.

Benefits And Drawbacks Of Insurance Outside Super

Greater Flexibility In Customizing Insurance Coverage

When it comes to insurance coverage, having it outside of your superannuation fund can have its advantages. One major benefit is the flexibility it offers in customizing your policy to your specific needs. Here are some of the ways you can achieve this:

  • You can choose the amount of insurance coverage you need, rather than a one-size-fits-all policy offered by super funds.
  • You can opt for a specific policy that suits your individual circumstances, such as incorporating income protection for freelancers or self-employed individuals.
  • You can add or remove features from your policy according to your preferences.

Higher Benefit Coverage

Insurance outside of super also has the potential to offer higher benefit coverage than policies included within a super fund. Some of the ways this can be achieved are:

  • You can select a policy that provides higher payouts when compared to those offered by super funds.
  • You can tailor your policy to include features that offer higher coverage like life insurance.
  • You can adjust your policy to keep up with the increasing cost of living and ensure your insurance coverage meets your evolving needs.

More Options For Add-Ons, Such As Trauma Insurance

When choosing insurance outside of your super fund, you have more options in terms of add-ons, such as trauma insurance. This added benefit helps support you financially in case of critical illness or injury. Some additional options you can choose from include:

  • Funeral insurance
  • Total permanent disability
  • Critical illness

Higher Premiums Due To Individual, Not Group, Rates

One of the main drawbacks of having insurance outside of super is the higher cost of premiums due to individual, not group, rates. Here are a few factors that contribute to this:

  • Individuals outside of a group have a higher chance of experiencing health issues, which can lead to higher premiums to offset the additional risk.
  • Private insurers are often more concerned with maximizing profits, unlike super funds that have a legal obligation to offer the best deal possible to their members.

Greater Administrative Burden In Managing Insurance Policies Separately From Super

When you opt for individual insurance coverage outside of a super fund, you’ll inevitably experience a greater administrative burden and added responsibilities. This can include:

  • Managing and organizing your different policies from various insurance providers.
  • Dealing with different points of contact for each policy when it comes to services like updating your personal details or making claims.
  • Keeping track of premium payments and policy renewal dates for each individual policy.

May Require Additional Medical Information Or Health Checks For Certain Policies

Finally, it’s essential to keep in mind that you may require additional medical information or health checks to access certain policies outside of your super fund. Here are some possible reasons why:

  • Insurance companies may need additional information to determine if you’re eligible for certain types of coverage or add-ons.
  • Private insurance companies are more focused on profit-making and may not be willing to give coverage to you depending on your health condition.

While there are benefits, in terms of flexibility, coverage, and add-ons, to having insurance outside of super, there are also some drawbacks, such as higher individual rates and administrative burdens. It’s important to carefully consider your circumstances and individual preferences when choosing which path to take.

Factors To Consider When Choosing Insurance Inside Super Or Outside Super

Choosing insurance inside or outside of your superannuation fund is one of the most significant financial decisions you can make. Several factors can influence your decision, including your profession and associated risks, personal health status, age, and financial situation. To help you make the right decision, we’ve outlined the key considerations to keep in mind when choosing insurance inside or outside your super.

Your Profession And Associated Risks

Your profession and associated risks can play a significant role in determining the type of insurance that works best for you. If your career carries a high level of risk, such as a construction worker or a firefighter, it’s critical to ensure that you have adequate coverage to protect you and your family.

On the other hand, if your job poses fewer risks, you might be able to opt for insurance outside of your super.

Consider these factors when deciding:

  • Does your job require you to work with dangerous machinery or equipment?
  • Are there any known health hazards related to your profession?
  • What is the likelihood of you being injured while working?

Personal Health Status And Medical Conditions

Before deciding between insurance inside or outside of your superannuation, it’s important to consider your personal health status and any underlying medical conditions. If you have pre-existing medical conditions, you may be able to access lower premiums if you choose insurance inside of superannuation.

However, it’s crucial to watch out for any policy exclusions that may negate your coverage when you need it the most.

Consider these factors when deciding:

  • Do you have any ongoing health conditions or require regular medical attention?
  • What is your family health history?
  • Will your insurance policy cover any pre-existing medical conditions?

Age And Stage Of Life

Another crucial factor to consider when choosing insurance inside or outside superannuation is your age and stage of life. If you’re young and single, you may not feel the need for significant coverage, while a married couple with young children may require more extensive coverage.

If you have a mortgage or other financial commitments, you may want to seek a higher level of coverage as well.

Consider these factors when deciding:

  • Are you married or single?
  • Do you have dependents or children?
  • Do you have a mortgage or other financial commitments?

Your Overall Financial Situation

Finally, when deciding between insurance inside or outside of your superannuation, you must consider your overall financial situation and ability to pay premiums. While premiums for insurance inside superannuation are usually deducted from your account balance, they can still limit your access to your super savings.

Conversely, paying for insurance outside of superannuation with after-tax dollars may be more affordable in the short-term, but it can impact your budget.

Consider these factors when deciding:

  • What is your current tax bracket?
  • What is your overall financial situation?
  • How much can you afford to pay in premiums?

Choosing between insurance inside or outside of your superannuation fund is a personal decision that requires careful consideration of several factors. By taking these factors into account and doing your research, you’ll be better equipped to determine which option is best for you.

Conclusion: Which Insurance Option Is Right For You?

Insurance Inside Super Vs Outside

When it comes to insurance options, there are two popular choices – inside super and outside super. While both options have their advantages and disadvantages, choosing the right one for you depends on various factors. In this blog post, we will discuss the pros and cons of each option, key factors that you need to consider, suitable scenarios where one option might be better than the other, and professional advice to help you make an informed decision.

Summary Of The Pros And Cons Of Each Option ()

Inside super:

  • Pros:
  • Premiums are paid with pre-tax dollars
  • It requires no separate application process
  • It is a convenient way to pay for insurance
  • The cost of premiums is deducted from your super balance
  • It may offer automatic acceptance without any health checks
  • Cons:
  • The level of cover may be less than what you need
  • It is only available through your super fund
  • There are certain restrictions on policy ownership and beneficiaries
  • Benefits may be taxed if they are paid to non-dependants

Outside super:

  • Pros:
  • It provides greater flexibility and choice
  • You can tailor the policy to your specific needs
  • The ownership of the policy and its beneficiaries are entirely up to you
  • You can choose the insurance provider that best suits your requirements
  • Cons:
  • Premiums are paid with after-tax dollars
  • The application process may require underwriting and health checks
  • It can be more complicated to administer the policy
  • It is an additional expense that may impact your disposable income

Factors To Consider When Making A Decision ()

Before deciding on the insurance option that is right for you, consider the following factors:

  • Your age, health status, and occupation
  • Your financial situation and budget
  • The level of cover that you need
  • The type of insurance that you require, such as life insurance, trauma, or income protection
  • The possible tax implications and benefits for each option
  • Your long-term financial goals, such as retirement planning and wealth accumulation

Possible scenarios where one option might be better than the other (###)

There are different scenarios where one insurance option might be more suitable for you than the other:

  • If you are young and healthy, and you don’t have any dependants, then inside super insurance may be more cost-effective for you due to its lower premiums.
  • If you have pre-existing medical conditions or a risky occupation, then outside super insurance may offer more comprehensive coverage and benefits.
  • If you need a higher level of cover than what your super fund provides or if your occupation is not covered by your fund’s insurance policy, then outside super insurance may be a better option.
  • If you want more control over the policy ownership, beneficiaries, and features, then outside super insurance is the preferred choice.

Professional Advice For Making An Informed Choice ()

Choosing the right insurance option can be a challenging and complex decision. It is always beneficial to seek professional advice from a licensed financial advisor who can provide you with customized advice based on your circumstances and needs. An advisor can help you:

  • Identify the risks and vulnerabilities in your financial plan
  • Compare the features, costs, and benefits of different insurance options
  • Ensure that the policies you choose comply with regulatory requirements and your investment strategy
  • Review and adjust your coverage as your circumstances change over time

Deciding whether to choose insurance inside super or outside super depends on your individual circumstances. Consider the pros and cons of each option, key factors, possible scenarios, and professional advice before making an informed choice. Whatever option you choose, ensure that it aligns with your financial goals and provides adequate protection for you and your loved ones.

Frequently Asked Questions Of Insurance Inside Super Vs Outside

What Is Insurance Inside Super?

Insurance inside super refers to the insurance coverage that is included in your superannuation fund. It means that your insurance premiums are paid from your super funds.

What Is Insurance Outside Super?

Insurance outside super refers to insurance that you buy directly from an insurer. It means that you pay your insurance premiums from your own money and not from your super funds.

What Are The Benefits Of Insurance Inside Super?

One of the significant benefits of insurance inside super is that it can be less costly compared to insurance outside super. Additionally, it is paid from your super funds and therefore reduces your disposable income.

What Are The Drawbacks Of Insurance Inside Super?

One of the disadvantages of insurance inside super is that the coverage may be limited, and some policies may not allow you to customize your coverage. Additionally, insurance claims can take longer to process.

How Does Insurance Impact Your Super Balance?

Having insurance inside super can impact your super balance over time, as the premiums are paid out from your account. However, it can offer greater peace of mind knowing that you have coverage in place against potential risks.

Is Insurance Inside Super Right For Everyone?

No, it depends on individual circumstances. It’s essential to consider the amount and type of coverage you need and compare insurance products from both inside and outside super to determine what’s right for you.


Overall, the decision to get insurance through your superannuation can be a smart one. It can offer a range of benefits such as lower fees and premiums, and greater convenience. However, it is important to carefully consider your individual circumstances and needs before making a decision.

Don’t just assume that insurance through your super is the best option. Make sure you compare policies, fees, and conditions both inside and outside of your super fund, and consider what would be the most appropriate and affordable option for you.

It’s also important to regularly review your insurance needs, as the amount and type of cover you require may change throughout your life. By taking the time to research and compare your options, you can make an informed decision that will help protect you and your loved ones in the event of unexpected circumstances.

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