Default life, TPD, and income protection cover inside super typically steps down at age milestones (50, 60, 65) and can cease by 65 or 70, while premiums rise per dollar of remaining cover. Most super-held TPD uses a restrictive any-occupation definition rather than own-occupation. Pre-retirees aged 55-67 should review cover, premium cost, and TPD definitions before retiring — cancelling is easy, but re-applying at 65 usually isn't.
Most members of APRA-regulated super funds carry default insurance without having reviewed it in years. Life cover, total and permanent disability (TPD) cover, and income protection are commonly bundled into standard super accounts, with premiums quietly deducted from the balance each month. In the years leading up to retirement — roughly the 55 to 67 window — a deliberate review of what you actually hold, what it costs, and whether you still need it is one of the more practical things you can do for your retirement balance.
The three standard forms of insurance inside super serve different purposes. Life insurance pays a lump sum to nominated beneficiaries on the member's death. TPD insurance pays a lump sum if the member becomes totally and permanently disabled and unable to work — the definition of "unable to work" being the critical variable, discussed below. Income protection pays a monthly benefit, typically 75 per cent of pre-disability income, for a defined period if illness or injury prevents the member from working. In each case the premiums come out of the super balance, not out of pocket. Many members are surprised, when they actually look, at how much of their balance has been absorbed by premiums over the years — particularly in late career when per-unit premiums are at their highest.
From 2019 and 2020, the federal government introduced two significant reforms to default super insurance. The Protecting Your Super reforms (from 1 July 2019) and the Putting Members' Interests First reforms (from 1 April 2020) together changed when default insurance is automatically provided. Members under 25 or with account balances below $6,000 are no longer automatically given default insurance — they must actively opt in. Importantly, accounts that have received no contributions or rollovers for 16 months are treated as inactive, and insurance on inactive accounts is cancelled unless the member opts in to retain it.
Confirmed Protecting Your Super provisions (APRA, https://www.apra.gov.au/protecting-your-super-package-frequently-asked-questions): trustees do NOT take out or maintain insurance for members under a MySuper or Choice product where the account is inactive for a continuous period of 16 months (no contributions or rollovers received). Members can elect to maintain insurance through inactivity by making a one-time election; alternatively, any contribution or rollover (regardless of amount) restarts the active-account clock. Putting Members' Interests First adds further protections: insurance is opt-in for new members under 25 and for accounts under $6,000.
For pre-retirees in the 55 to 67 range who have been making contributions throughout their working lives, these reforms are mostly background context — your account is active and default insurance should be in place. But if you have multiple super accounts and one became dormant after changing employers years ago, the insurance there may have been silently cancelled. Worth a quick check of any accounts you haven't looked at recently.
The more significant issue for pre-retirees is that most default super insurance is designed to track life stages — and the track runs downward. Cover amounts step down at age milestones: many funds reduce death and TPD cover at 50, again at 60, and again at 65. Cover ceases entirely at maximum ages that vary by fund and cover type — death cover often ceases at 65 or 70, TPD at 65, income protection at 65 or earlier. A pre-retiree who set up their insurance at 45 and has not reviewed it since may be carrying materially less cover than they assumed, paying higher premiums per dollar of remaining cover, and approaching a cessation age they didn't know existed.
On TPD specifically, the most important thing to understand is the definition of "totally and permanently disabled." Most super-held TPD policies use an any-occupation definition: the member is disabled only if they cannot work in any occupation for which they are reasonably suited by education, training, or experience. This is considerably more restrictive than the own-occupation definition available in some policies held outside super, which pays if the member cannot perform their specific occupation. The practical difference is real: a specialist surgeon whose hand injury prevents surgical work but who could still work as a medical administrator would likely not meet the any-occupation threshold. An executive who can no longer manage an organisation at the level their career demanded but who could do administrative work in another context might not either. For senior professionals and executives whose earning capacity depends on specific skills, the gap between any-occupation and own-occupation cover can represent a substantial uninsured risk.
The premium cost at older ages is worth quantifying. A 60-year-old carrying default life and TPD cover may be paying somewhere in the range of $1,500 to $3,000 per year in premiums — the actual figure varies widely by fund, cover type, and cover amount. Over five years to retirement, that range represents $7,500 to $15,000 in erosion to the super balance. Whether that cost is reasonable depends on whether the cover is still needed and whether its residual value is meaningful. For a member whose children are grown and self-supporting, whose mortgage is paid, and whose retirement assets are sufficient to support their spouse without insurance proceeds, the case for retaining life and TPD cover is weaker than it was at 40.
The tax treatment of insurance benefits paid through super depends on the type of benefit and who receives it. Life insurance death benefits paid to a tax dependant — a spouse, former spouse, minor child, or financial dependant — are tax-free. Death benefits paid to a non-tax-dependant such as an adult child attract tax at 15 per cent plus the Medicare levy on the taxable component (FirstTech/Colonial First State, Super Death Benefits Guide 2025-26, current to 1 July 2025). This is the same treatment as other super death benefits — the insurance amount forms part of the total death benefit and is taxed consistently with it. TPD benefits paid to the living member aged 60 or over from a taxed super fund are generally tax-free. For members who receive a TPD benefit before age 60, tax applies to the taxable component with some concessional treatment for the disability element, and the specifics depend on the member's age and the structure of their account. Income protection benefits are taxed as ordinary income — they replace salary, and they are taxed like salary.
For any pre-retiree who has not reviewed their super insurance recently, the exercise is straightforward: pull out the product disclosure statement (PDS) for your fund's insurance, look at your most recent annual statement or member portal for the actual cover amounts and premium deductions, and ask five questions. Do you still need the cover, given your current financial position and dependants? Is the amount still adequate, given any step-downs that have occurred since you first received it? Is the premium cost reasonable relative to the cover and your alternative uses of those funds? Is the TPD definition any-occupation, and if so, is that adequate for your occupation? And for income protection: does the remaining benefit period align with how long you plan to keep working? If the answers reveal a mismatch — too much cover you no longer need, or too little cover for what remains at stake — the time to address it is before retirement, not after. Cancelling cover once you retire is easy; re-applying with a health history at 65 is not.
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Key takeaways
- Default super insurance — life, TPD, and income protection — commonly steps down cover amounts at age milestones like 50, 60, and 65, and ceases entirely by a fund-specific maximum age (often 65-70), while premiums rise per dollar of remaining cover as members age.
- Since 2019-2020, Protecting Your Super and Putting Members' Interests First reforms cancel default insurance on accounts inactive for 16 continuous months (no contributions or rollovers) unless the member opts in — worth checking on any dormant accounts from past employers.
- Most super-held TPD policies use a restrictive any-occupation definition — the member must be unable to work in any occupation they're reasonably suited to, not just their own — a materially narrower threshold than own-occupation cover sometimes available outside super.
- A 60-year-old carrying default life and TPD cover might pay $1,500-$3,000 a year in premiums, eroding $7,500-$15,000 from the super balance over five years to retirement — whether that's worthwhile depends on whether dependants and financial obligations still require the cover.
- Life insurance death benefits are tax-free to a tax dependant (spouse, minor child, financial dependant) but taxed at 15% plus Medicare levy to a non-dependant like an adult child; TPD benefits to a member 60 or over from a taxed fund are generally tax-free; income protection benefits are taxed as ordinary income.
Frequently asked questions
Does super insurance cover reduce as you get older?
Yes, for most default super insurance. Cover amounts commonly step down at age milestones — many funds reduce death and TPD cover at 50, again at 60, and again at 65 — and cease entirely at a maximum age that varies by fund and cover type, often 65 or 70 for death cover, 65 for TPD, and sometimes earlier for income protection. A member who set up cover at 45 and hasn't reviewed it since may be carrying materially less cover than they assume, at a higher premium per dollar of remaining cover.
What is the difference between any-occupation and own-occupation TPD cover?
Any-occupation TPD, the definition used by most super-held policies, only pays out if the member can't work in any occupation they're reasonably suited to by education, training, or experience — not just their own job. Own-occupation cover, sometimes available outside super, pays if the member can't perform their specific occupation, even if they could do other work. For senior professionals whose earning capacity depends on specific skills, the gap between the two can leave a substantial uninsured risk.
Are super insurance benefits taxed?
It depends on the benefit type and recipient. Life insurance death benefits paid to a tax dependant — spouse, minor child, or financial dependant — are tax-free; paid to a non-dependant like an adult child, they're taxed at 15% plus Medicare levy on the taxable component. TPD benefits paid to a living member aged 60 or over from a taxed super fund are generally tax-free, with different concessional treatment applying before age 60. Income protection benefits are taxed as ordinary income, since they replace salary.
When should I review my super insurance before retiring?
In the years leading up to retirement, roughly the 55 to 67 window. Check your product disclosure statement and recent annual statement for actual cover amounts and premiums, then ask whether you still need the cover given your dependants and financial position, whether the amount is still adequate after any step-downs, whether the premium is reasonable, and whether the TPD definition suits your occupation. It's important to do this before retiring — cancelling cover is easy, but re-applying with a health history at 65 usually isn't.