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income protection and life insurance Australia

Income protection and life insurance in Australia, worked out step by step

Most Australians already hold some death, TPD or income protection cover through their super fund, often without knowing how much or on what terms. These guides show what each type of cover pays, what drives the premium, how tax treats it, and what to do when a claim goes wrong.

  • Inside super or retail: definitions, premiums, tax and the opt-in rules for under-25s, low balances and inactive accounts
  • Worked examples: how much cover you need, waiting and benefit periods, and the after-tax cost of income protection
  • Claims, the Life Insurance Code of Practice, the duty to take reasonable care and free complaints to AFCA

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Costs, Cover Types and 2026 Rules

What life, TPD, trauma and income protection cover pay, what drives the premium, and the super, APRA and tax rules that apply in 2026.

8 Guides

Worked Examples and Checklists

Calculations for real decisions: how much cover, which waiting and benefit period, trauma or not, the cost of cover in super, and tax on payouts.

8 Guides

Claims, Mistakes and Official Sources

How claims are assessed, the duty to take reasonable care, the Life Insurance Code of Practice, complaints to AFCA, and the mistakes that leave people uncovered.

6 Guides

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Life, TPD, Trauma and Income Protection Compared

Cover or optionHow it worksGood forWatch out for
Life (death) cover in superLump sum paid to the fund on death or terminal illness, then paid out to your dependants or estate under the fund's rules and your nominationLow-cost base cover paid from your balance, often with no health questions for default coverDefault cover can be switched off if the account is inactive for 16 months, you are under 25 or the balance has stayed under $6,000; tax may apply if paid to a non-dependant
Life cover outside super (retail)You own the policy and name beneficiaries directly; premiums paid from after-tax incomePaying adult children or others who are not tax dependants without the super death benefit taxPremiums are not tax-deductible; full underwriting at application
TPD cover in superLump sum if you are unlikely ever to work again in any occupation suited to your education, training or experienceAffordable TPD paid from your balanceOwn-occupation TPD is not permitted for new cover in super; the benefit must also meet the permanent incapacity condition of release; tax may apply under age 60
TPD cover outside superLump sum under the policy definition, which can be own occupation (unable to work in your own job)Specialised workers whose income depends on one occupationHigher premiums from after-tax money; definitions and exclusions vary

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Frequently asked questions

Do I already have life insurance through my super?

Quite possibly. Many MySuper and employer default accounts include death and TPD cover, and some include income protection, unless the cover has been switched off because the account was inactive for 16 months, you are under 25 or your balance has stayed below $6,000. Log in to your fund or check your annual statement for the cover amounts and premiums. See cover in super versus retail.

Are income protection premiums tax-deductible in Australia?

Usually yes, if you pay them yourself for a policy held outside super that replaces lost income. Life, TPD and trauma premiums are not deductible, and premiums paid from your super balance are deducted by the fund, not by you. Benefits paid under a deductible policy are taxable income. See the tax deduction guide.

What changed in income protection in 2021?

APRA required insurers to redesign new individual income protection policies. Since 1 October 2021, new policies generally replace up to 70% of income, with up to 90% allowed in the first six months, base the benefit on income in the 12 months before the claim, and apply a stricter work test after two years on claim. Agreed value policies stopped being sold from April 2020. See the 2021 income protection changes.

Can I have trauma insurance inside super?

No. Since 1 July 2014, super funds cannot provide new trauma cover, because a trauma payout does not match a condition of release for super. Trauma cover has to be held outside super and paid from your own money. See is trauma insurance worth it.

How much life insurance do I need?

A common starting point is debts to clear, plus final costs, plus enough to replace the income your family relies on for a set number of years, minus savings, super and other cover. The answer is personal, so work through the life cover needs example with your own figures.

What can I do if my life insurance claim is declined?

Ask the insurer or super fund for the reasons and the documents it relied on, then lodge a written complaint through its internal dispute resolution process. If you are not satisfied with the response, you can complain to AFCA free of charge, generally within two years of the final response. See AFCA complaints.

Should I cancel the insurance in my super if I have a retail policy?

Only after comparing the definitions, cover amounts and premiums, and only once any replacement is accepted in writing. Cover in super may have been issued without health questions, so cancelling it can mean you cannot get it back on the same terms. See life insurance mistakes to avoid.

How this site is made

Benefit Period is an independent information project. Guides are drafted with the help of AI writing tools and checked against official and primary sources before publication; see our Editorial Policy. We are not affiliated with any provider mentioned on the site and do not sell products or services.