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Different Types of Superannuation Insurances Explained

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Superannuation is a savings plan for retirement that is offered to employees in Australia.

It’s a way for workers to save for their retirement and ensure that they have a steady stream of income once they stop working.

In addition to these savings, most superannuation funds also include a variety of insurance policies. These are cost-effective ways to ensure you and your loved ones are financially protected in the event, you’re unable to work because of injuries, illness or your death.

Each superannuation insurance type has its own unique features and benefits.

In this blog post, we take a closer look at the three different types of Superannuation Insurances

Total and Permanent Disability (TPD insurance)

One of the most common types of superannuation insurance for injuries is Total and Permanent Disability insurance, also known as TPD.

This type of insurance provides a lump sum payment if you are unable to return to work.

It covers any type of injury, illness or condition. It includes a physical injury, mental illness, or other medical condition regardless of the way it came about. These don’t have to be caused by any event like a work accident or motor vehicle accident.

The definition of “total and permanent disability” may vary depending on the policy. However, it generally covers conditions that are unlikely to improve and prevent you from returning to work. Granted that it is within your education, training or experience.

As mentioned above, a TPD claim is typically paid out as a lump sum payment.

You can use the money in whichever way you like. However, most use it to cover medical expenses, rehabilitation costs and other expenses related to the disability.

Like with any insurance policy and compensation scheme there are strict criteria you must fit in order to be able to claim.

Read more about understanding TPD insurance through superannuation.

Income Protection Insurance

Another type of injury insurance commonly held in superannuation funds is Income Protection insurance. Also known as salary continuance benefits.

You may recall seeing ads on TV or hearing ads on the radio advertising income protection insurance, and often for good reason.

Unlike with TPD insurance, this type of insurance provides a regular, often monthly, income. It is afforded to those unable to work due to a temporary disability (including injury and illness).

The insurance benefit is generally paid to you at about 75 per cent of your pre-disability income until you can return to work, or until a specified period has passed (usually set out in your insurance policy terms and conditions).

Read more about what is income protection insurance.

Death Insurance

Superannuation death insurance provides a financial benefit to the beneficiaries of your policy in the event of your death.

If you hold death insurance through your superannuation, your fund will generally pay out the balance of your superannuation account. Including any death insurance benefit to whomever you have nominated as your beneficiaries (usually a spouse or dependent children).

They can use this money to help cover funeral expenses and other costs associated with your passing. Including mortgage payments and other bills you were responsible for.

Unlike other insurances, death insurance requires a little more attention.

It’s important that you regularly review your death insurance policy within your superannuation and make sure that your beneficiaries are up to date – the last thing you want in the event of your death is the benefit going to the wrong person because of an outdated policy.

It’s also important that when taking out such insurance, that you consider your options. Make sure you have the right level of coverage for your and your family’s needs.

By this we mean, some people may require additional support from life insurance outside of their superannuation fund to provide more comprehensive protection for their loved ones.

Read more about superannuation death benefits explained.

In addition to these types of insurances, some super funds also offer additional benefits such as access to discounted health services and financial advice.

It’s also worth noting that most of these insurance benefits may be claimed in addition to other injury compensation settlements such as CTP claims or WorkCover claims.

If you are from Queensland you can learn more on our Queensland Superannuation Page