What happens to your super insurance when life gets in the way
EducationArticle1 June 2023
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What happens to your super insurance when life gets in the way
No work, no insurance? What happens when you can’t contribute to your super fund?
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At some stage many of us will take a break in our careers – to retrain, study, raise a family or because we’re unwell. While we’re not working, we may not be getting employee super contributions. While these gaps can affect your insurance, in most cases you will continue to be covered.
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The chances are that your superannuation account includes some level of life and total and permanent disablement (TPD) insurance – unless you’re under the age of 25 or have less than $6,000 in your retirement account (although you can choose to stay covered in this instance). This cover protects you and your family, and the assets that you’ve worked hard for over more years, in case of an emergency.
And because we purchase insurance on behalf of nearly all our members, we’re able to offer more affordable premiums than you may be able to find outside of super. The premiums are simply paid for from your account with your other fees.
But what happens when life gets in the way, and for whatever reason you can’t make contributions for an extended period and your account’s growth idles for a bit? Understanding how this impacts your insurance and your long-term financial wellbeing is particularly important as you head towards retirement.
What happens if I’m not making contributions?
The short answer is ‘not much’, unless your contributions stop for more than 16 months unless you contact your super fund and inform them that you wish to retain your cover (see below for more on that).
Career gaps – and their associated drop off in super contributions – aren’t uncommon in Australia.1
By the end of July 2022, there were almost half a million Australians out of work who were actively looking for a new job.2 This figure doesn’t account for the thousands more who aren’t on the hunt for a new job because of other priorities.
Many of these people rely on the insurance provided by their superannuation. Rather than cancel coverage for hundreds of thousands of people, super funds such as ours continue to provide their members with coverage after their employer contributions stall.
What happens after 16 months?
If you don’t make any contributions to your superannuation in more than 16 months, your super account will be deemed ‘inactive’ and your insurance coverage will end. Inactive accounts with less than $6,000 in savings must be reported by the fund and transferred to the Australian Taxation Office3, which will try to locate your active super account, if you have one, and consolidate the two.
This policy is designed to protect you from whittling away your retirement savings by paying fees on multiple accounts.
Before we make any changes to your insurance coverage or super account in line with these rules, we’ll make sure to let you know.
We will notify you before making any changes to your insurance coverage.
1 KPMG, ‘Parental equality and unpaid work reforms’, KPMG, 3 May 2021, accessed 20 September 2022
2 ABS, ‘Labour Force, Australia’, Reference period August 2022, 15 September 2022, accessed 20 September 2022
3 Inactive low-balance super accounts | Australian Taxation Office (ato.gov.au)
This information provides an overview only on specific topics and may be limited in scope or subject to qualifications and generalisations. It is provided for your use with insureds and superannuation fund members.
The information provided is also designed to be provided to insureds and superannuation fund members under your own name and any applicable licenses. You will need to consider whether the information is required to be changed or qualified in doing so. To the extent that there is inconsistency between the information on this website and the relevant policy, the policy will take precedence. You should take professional advice and review the appropriateness of the information before it is used by you.
This information does not consider any specific personal needs, objectives, or financial circumstances.
© Zurich Australia Limited ABN 92 000 010 195, AFSL 232510. Information within it is current as at May 2023 but may be subject to change. Updated information will be available by contacting Customer Service on 131 551.
