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Will the insurance in my Super protect me fully when I need it most?

The short answer is no, it will not unless you have conducted a needs analysis and reviewed the type and amount of cover that you have within your super fund, the chances are that you do not have enough to protect you when you need it.

There are 4 types of insurance cover. Life, TPD, Trauma and Income Protection. 3 of these are available within superannuation:

  • Life
  • TPD
  • Income Protection

Trauma cover is not available through superannuation. Trauma cover protects you in the event that you suffer from serious illness or trauma (i.e cancer, heart attack, Parkinson’s disease etc.)

May people assume that they can claim on their TPD cover if they suffered from a trauma, this is not the case. TPD by definition is total and permanent disability.

The amount of cover you need depends on your situation. To work out roughly if you have enough and whether it would cover your needs, consider the following:

Life cover:

  • Total amount of debt
  • Funds for funeral expenses
  • If you have dependants or a spouse:
    • An education fund,
    • Supplement income for your spouse so they can continue to care for children when you are gone.
    • Any other capital requirements (a lump sum for your children to be kept in trust etc.)

Total and Permanent Disability (TPD):

  • Total amount of debt
  • Funds for provision of medical expenses
  • If you have dependants or a spouse:
    • Supplement income for your spouse so they can continue to care for children if you are unable too.
    • Provision for home renovations
    • Any other capital requirements

Income Protection:

  • The sum insured is a monthly figure of 75% of your monthly income (the easiest way to work out your benefit is: Your annual salary*75%/12
  • The wait period – is the time you have to wait before getting paid. Would you and your family be ok with no income for 30, 60 or 90 days?

Benefit period- is how long you will receive the payments for. Ideally up until age 65 so that it provides for your living expenses for the long-term and you aren’t caught unstuck if you suffer from a long-term injury or illness that prevents you from returning to work.