How much insurance cover is enough? A guide for younger members

When you’re in your 20s, 30s or early 40s, having insurance cover inside of your superannuation probably isn’t something you think about often.

Life feels busy enough with work, study, travel, rent or a mortgage, and maybe starting a family.

But this is exactly why it’s worth taking a moment to check whether your current insurance cover inside super is set at the right level for your life stage.

Super funds like legalsuper offer insurance options such as Death Insurance, Total and Permanent Disablement (TPD) cover and Salary Continuance (also known as Income Protection). These can provide financial support if something unexpected happens.

The good news is that it’s usually easy to adjust your super insurance cover up or down depending on your needs, and the cost is deducted from your super balance rather than your take‑home pay.

legalsuper also offers additional insurance for life and work events, which makes it easy for members to adjust their cover should a specific event occur.

Understanding the types of cover

Death insurance pays a lump sum to your beneficiaries if you pass away, TPD cover provides a payment if you become permanently unable to work due to illness or injury, and Salary Continuance can replace part of your income for a period if you’re temporarily unable to work.

The types and the amounts of cover you have is very much a personal choice and often depends on your stage in life.

For example, as a younger person, you may not have any dependants, a mortgage, or any other significant financial commitments yet.

Because insurance costs are generally deducted from your super contributions, you may decide to have a lower level of insurance cover at this point that still provides meaningful protection, without reducing your super balance too much.

How much cover do you really need?

There’s no single answer to this question, because everyone’s situation is different.

Your 20s and 30s are full of change. You might move cities, switch careers, start a business, buy a home or begin a family. Each of these milestones can affect how much insurance you need.

If you’re planning a family, you may want to increase your Death or TPD insurance cover. If you’ve paid off debts or built a financial buffer, you may decide to reduce your cover. The important thing is that your insurance reflects your current life, not the life you had five years ago.

For people under 40, a modest level of Death and TPD cover may be enough. Salary Continuance can also be helpful, especially if you don’t have large savings to fall back on. The key is choosing a level of cover that fits your current circumstances, knowing you can increase it later if life changes.

A good starting point is to think about what would happen if you couldn’t work for an extended period or if you passed away unexpectedly. 

Does someone else rely on your income? Do you have debts that would need to be paid off? In the case of a severe injury and permanent disability, would you need money to support rehabilitation or living costs?

Adjusting your cover is straightforward

One of the advantages of insurance inside super is flexibility. You can usually increase or decrease your cover at any time.

If you’ve recently moved out of home, started a new job or taken on a small debt, you might want to review your cover. If you’ve built up savings or have fewer financial responsibilities, you might decide to reduce it.

Because premiums are deducted from your super balance, adjusting your cover won’t affect your regular pay. However, higher levels of cover generally mean higher premiums, so it’s important to balance protection with the impact on your retirement savings.

A quick review can make a big difference

It’s always worthwhile checking how much you’re paying on your premiums.

Younger members often pay lower premiums, but it’s still smart to make sure the cost is appropriate for the level of cover you hold.

You can quickly see your insurance options by logging into your online account or using our mobile app. Just select the ‘Insurance’ tab to review your current cover. You can also review how much you’ve paid for your cover by checking your transaction history.

Taking a few minutes to check your insurance cover now can help protect your future without costing you financially today. As a legalsuper member you have access to personal advice via your online account and can generate a Statement of Advice that recommends a level of Death, TPD and Salary Continuance cover based on your personal circumstances. It’s easy to adjust your cover, and doing so ensures you’re not paying for more than you need to, or that you’re leaving yourself or your dependants under protected. This advice is prepared via our partner MUFGRetire360, under their AFS Licence No. 258 145, ABN 36 105 811 836.

For more information on how much insurance cover you may need, click here.