Weigh up the benefits of having life insurance within your super.

Super funds can’t offer a wide range of policies but they do provide a hassle-free way to add life, income protection and total permanent disability cover that many of us might not have otherwise.

Funds can often negotiate better prices as they buy group rather than individual insurance.

“As a general rule, not enough people have enough insurance and that’s the critical issue we are trying to solve,” says Paul Schroder, AustralianSuper’s group executive of membership.

“Not enough people put enough thought into insurance so a very good way to get access to it is through their super fund.”

There bonuses to using this type of insurance, but there are also some drawbacks so weigh up the advantages and disadvantages to work out what’s best for you and your family.

Attaching group life and other insurance to your super is a great way to cover yourself and your family.Source:Supplied

ADVANTAGES

1. When buying insurance within super you buy as part of a big group so you have much more bargaining power than as an individual.

2. Usually it is much easier to access this type of insurance as you don’t have to jump through as many hoops, such as taking medical tests. “There are rules but generally it’s much easier to get access to it,” says Schroder.

3. If you’re part of a fund which is set up to act in the interest of its investor then it can also act as an advocate on your behalf in the event that you do need to make a claim. This is the case in particular with industry funds, says Schroder.

4. You’re paying your insurance in a tax effective way as your premiums are paid in a tax exempt way.

5. It’s a payment that you don’t even notice. “You are already making contributions as part of your pay, which you don’t notice, and your premium is paid from the same pot so you probably won’t notice that either.”

Having adequate insurance makes you better prepared to answer the question.Source:Supplied

DISADVANTAGES

1. You must keep track of which fund or funds you are paying the insurance premiums from.

If you forget about a fund and you are no longer paying for the premium you might lose that insurance.

Luke Shrewsbury, wealth manager at Yellow Brick Road says pay close attention to the terms and conditions of the insurance you are buying within a super fund as these can change.

“For example you may have $200,000 worth of life insurance included when you are 30 but it might decrease by a small amount each year (as you get older),” he says.

2. If you are highly paid and able to make extra contributions, the government's proposed changes to super that will cap contributions at $25,000 year may impact you as insurance premiums are counted as part of that amount.

3. There are other important types of insurance that super funds are not allowed to offer such as health or trauma and that you need to get separately.

Shrewsbury says you can take out a more tailored insurance policy that is not part of the fund’s group default policy and still pay for it from your super fund.