Hidden Fees? Why Your 'Superannuation' Fund is Charging You for Life Insurance You Didn't Ask For

Hidden Fees?

If you are working in Australia, you almost certainly have a Superannuation (Super) account. As of the 2025-26 financial year, your employer pays 12% of your salary into it for your retirement.

But have you checked your statement recently? You might notice monthly deductions for "Death Cover," "TPD Cover," or "Income Protection."

Many Australians don't realize that insurance premiums are often deducted automatically from their Super fund. Is this a smart safety net or a fee-eating vampire destroying your retirement nest egg?

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What is "Insurance Inside Super"?

Under Australian law (MySuper legislation), most Super funds automatically sign eligible members up for:

• Life Insurance (Death Cover): Pays a lump sum to your family if you die.
• TPD (Total & Permanent Disability): Pays if you can never work again due to illness/injury.

Note regarding PMIF laws: If you are under 25 years old or your account balance is below $6,000, insurance may not be automatic unless you specifically opt-in. However, for most established workers, this cover is active by default.

The premiums are deducted directly from your Super balance, not your bank account. This is why many people don't notice the eroding balance.

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The Good News: Why Keep It?

For many people, this is the cheapest and easiest way to get insured.

• Tax Effective: Premiums are paid from pre-tax dollars (concessional contributions), which is usually more cost-effective than paying from your net salary.
• Bulk Rates: Super funds buy insurance wholesale (group policies), so rates are often lower than individual retail policies.
• Automatic Acceptance: You usually don't need a medical exam to get the default level of cover, which is great for those with pre-existing conditions.

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The Bad News: The "Zombie Policy" Trap

The biggest problem arises if you have multiple legacy Super accounts from previous jobs.

⚠️ The "Zombie" Scenario

If you have old Super funds from previous jobs before the "Stapling" legislation came into effect, you could be paying for multiple sets of insurance premiums.

While you might be able to claim on multiple death policies, you can legally only claim on one income protection policy. The others are "Zombie Policies"—eating your fees for zero benefit. This can drain thousands of dollars from your retirement over a decade.

Is the Cover Enough?

Default cover is often low (e.g., $100,000 to $200,000). For a parent with a mortgage in a major city like Sydney or Melbourne and growing children, this payout is insufficient. Relying solely on default Super insurance might leave your family significantly underinsured.

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Don't Let Fees Drain Your Future

Don't let your Super be on autopilot. Take control of your retirement savings today:

1. Log in to your Super fund's portal or check via myGov (ATO online services) to see all your active accounts.
2. Look for the "Insurance" tab in each account to see active premiums.
3. Consolidate your Super accounts into one high-performing fund to stop paying duplicate fees and premiums.
4. Review your cover needs. If you are single with no debt, you might consider adjusting it. If you have a family, check if you need to top it up.

General Advice Warning: The information provided in this article is general in nature and does not take into account your personal financial situation, needs, or objectives. Before making any decisions regarding your Superannuation or insurance, you should consult the Product Disclosure Statement (PDS) and consider speaking with a qualified financial adviser.