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Retail Life Insurance vs Life Insurance Through Super: Complete Australian Comparison (2026)
Here's something most Australians don't know: 80% of working Australians have default life insurance through their super fund - but most have never actually checked what it covers.
Even more concerning: the insurance you have through super is fundamentally different from retail (personal) life insurance. The differences aren't just about cost - they're about whether you'll actually be covered when you need it most.
This guide breaks down the critical differences between retail and super insurance using real Product Disclosure Statement (PDS) data from 9 major Australian insurers. By the end, you'll know exactly which type of insurance you need (or whether you need both).
Important: This article provides general advice only. Insurance needs vary significantly by individual circumstances. Always consult a licensed insurance adviser before making decisions.
The 80% Coverage Gap Most Australians Don't Know About
Default super insurance typically provides:
Life cover: 1-2x your salary (e.g., $120,000-$240,000)
TPD cover: 1-2x your salary with "Any Occupation" definition
NO trauma cover
NO income protection (in most cases)
What most families actually need:
Life cover: $500,000-$2,000,000+ (mortgage + income replacement + education)
TPD cover: "Own Occupation" definition for white-collar professionals
Trauma cover: $200,000-$500,000
Income protection: 70-75% of income to age 65
The gap between what you have and what you need could be $1 million or more.
Quick Comparison: Retail vs Super at a Glance
Feature
Retail (Personal)(Recommended)
Super (Fund)
TPD Definition
Own Occupation (stronger)
Any Occupation (weaker)
Portability
Stays with you between jobs
Lost when switching funds
Cost
Higher (30-40% more)
Lower (group rates)
Tax Treatment (Premiums)
After-tax (no deduction)
Pre-tax (15% tax rate)
Tax Treatment (Claims)
Tax-free
Tax-free (with conditions)
Trauma Cover
Available
NOT available
Coverage Amounts
Up to $60M (life)
Limited by fund
Customization
Fully customizable
Minimal options
Underwriting
Full medical required
Limited medical questions
Premium Structure
Stepped or Level options
Age-based (auto-reduces)
Source: Analysis of PDSs from AIA, TAL, OnePath, Zurich, MLC, and 4 major super funds (2026)
The Critical Difference: TPD Definitions (Own vs Any Occupation)
THIS IS THE MOST IMPORTANT SECTION OF THIS ARTICLE.
The difference between "Own Occupation" and "Any Occupation" Total and Permanent Disability definitions determines whether you'll be covered for 90% of TPD claims in white-collar professions.
Own Occupation TPD (Retail Insurance)
Definition from AIA PDS (Section 12.1, Page 221):
"Total and Permanent Disablement (Own Occupation) means... solely because of Injury or Sickness you have been absent from work in your Own Occupation and have not worked for an uninterrupted period of at least three consecutive months... and at the end of the period of three months... you have become incapacitated to such an extent as to render you unlikely ever to engage in your Own Occupation."
What this means in plain English:
You're covered if you can't do your specific job
You can still be capable of doing some other work
If you can never work as an accountant again (your occupation), you're covered
Even if you could theoretically work as a shop assistant, you're still covered
Any Occupation TPD (Super Insurance)
Definition from AIA PDS (Section 12.1, Page 221):
"Total and Permanent Disablement (Any Occupation) means... you have become incapacitated to such an extent as to render you unlikely ever to engage in any business, profession or occupation for which you are reasonably suited by education, training or experience."
What this means in plain English:
You're only covered if you can't do any job at all
You must be unable to work in any role you're reasonably qualified for
Even if you can never work as an accountant again, you're NOT covered if you could work as a shop assistant
This is a much higher bar to meet
Real-World Case Study: The Office Worker with a Back Injury
Can I have both retail and super insurance at the same time?
Yes, absolutely. In fact, this is the recommended "hybrid strategy" for most Australians. You can maintain:
Default super insurance (cheap baseline cover)
Retail life insurance (top-up to required amount)
Retail Own Occupation TPD (better definition than super)
Retail trauma cover (not available in super)
Most policies allow you to claim from both if you meet the criteria (e.g., both Any Occupation and Own Occupation TPD in a severe disability). Check policy terms for coordination of benefits clauses.
Should I cancel my super insurance if I get retail cover?
It depends on your situation:
Keep super insurance if:
Cost is very low (under $50/month)
Provides meaningful coverage (e.g., $200K+)
Health has deteriorated (may not qualify for retail)
Want maximum total coverage
Cancel super insurance if:
Premiums are high relative to coverage
Coverage is inadequate (e.g., under $100K)
Want to preserve super balance for retirement
Have comprehensive retail coverage
Most advisers recommend: Keep super insurance as supplemental baseline cover.
What if I'm self-employed and don't have super insurance?
Self-employed insurance options:
Retail insurance:
Only option for most self-employed
Full range of covers available (life, TPD, trauma, income protection)
Premiums paid from business or personal funds
Super fund insurance:
Can opt-in if making super contributions
Some self-managed super funds (SMSFs) allow insurance
Generally limited options compared to retail
Income protection for self-employed:
Premium is tax-deductible as business expense
Must provide 2 years of financials
Benefit based on average income
Recommendation: Retail insurance is typically better for self-employed due to flexibility and guaranteed cover.
How do claims work if I have both super and retail TPD insurance?
Claiming from both policies:
Scenario 1: Severe disability (meets both definitions)
Super Any Occupation TPD: ✅ Claim approved ($250K)
Retail Own Occupation TPD: ✅ Claim approved ($500K)
Total payout: $750K
Scenario 2: Can't work in your job but could work elsewhere
Super Any Occupation TPD: ❌ Claim denied (you can work in other roles)
Retail Own Occupation TPD: ✅ Claim approved ($500K)
Total payout: $500K
Coordination of benefits: Most policies allow you to claim from multiple policies. Check for:
"Other insurance" clauses (some policies reduce payout if you have other cover)
"Non-duplication" clauses (rare, but some super funds have these)
Claim offsets (some policies offset by government benefits or other insurance)
Always declare all insurance when claiming to avoid claim denial for non-disclosure.
Is trauma cover really necessary if I have life and TPD insurance?
YES - trauma cover fills critical gaps:
What trauma cover does that life/TPD doesn't:
Scenario
Life Insurance
TPD Insurance
Trauma Cover
Cancer diagnosis (expected to survive)
❌ No payout
❌ No payout (not permanently disabled)
✅ Pays immediately
Heart attack (full recovery expected)
❌ No payout
❌ No payout
✅ Pays immediately
Stroke (partial recovery, can return to work)
❌ No payout
❌ No payout
✅ Pays immediately
Terminal illness (death expected)
✅ Pays early
May pay
✅ Pays early
Permanent disability (can't work ever again)
❌ No payout (still alive)
✅ Pays
❌ Usually paid under TPD
When trauma cover is most valuable:
Early cancer diagnosis (treatment costs, time off work)
Heart attack or stroke (rehabilitation, reduced work capacity)
Major surgery (time off, medical costs)
Serious illness with full recovery expected
Statistics: 1 in 2 Australians will be diagnosed with cancer by age 85. Most will survive but need financial support during treatment.
Recommendation: Trauma cover of $200K-$500K is valuable for families with mortgages and dependents.
Can I take my super insurance with me to a new super fund?
Unfortunately, no. Super insurance is NOT portable. Here's what happens:
When you switch super funds:
Old fund: Insurance cancels when you close the account
New fund: Must apply for new insurance
New underwriting: Medical questions, may be declined or loaded
Exclusions: Any health changes since old policy may be excluded
Options to maintain coverage:
Option 1: Keep old super account open
Maintain insurance by keeping minimum balance
Continue paying premiums from super balance
Consolidate other super funds but keep this one for insurance
Option 2: Convert to retail policy
Some super funds allow you to convert to retail policy when leaving
May retain coverage without new underwriting
Usually more expensive than super rates
Option 3: Apply for retail insurance before switching
Get retail policy approved
Then switch super funds
Ensures continuous coverage
Recommendation: If you have good super insurance and are changing funds, take out retail insurance first before switching funds.
What happens to my super insurance when I turn 65?
Most super funds automatically reduce or cease cover at age 65:
Typical super fund structure:
Age 60-65: Coverage may reduce by 25-50%
Age 65: TPD cover ceases (can't be "permanently unable to work" if you're retirement age)
Age 70: Life cover ceases or reduces to minimal amount ($10K-$50K for funeral costs)
Retail insurance options at age 65+:
Life cover: Can continue to age 100 (ongoing premiums)
TPD cover: Converts to different definition or ceases at age 65-70
Trauma cover: Usually ceases at age 70-75
Premiums: Significantly higher at older ages
Planning for retirement:
Review insurance needs at age 60
Determine if you still need coverage (e.g., remaining mortgage, dependents)
Consider if coverage will be affordable post-retirement
May choose to reduce coverage rather than cancel entirely
Are there any super funds that offer Own Occupation TPD?
Very few super funds offer Own Occupation TPD, and those that do usually:
Charge significantly higher premiums (similar to retail rates)
Restrict it to white-collar occupations only
Require full medical underwriting
Limit maximum coverage amounts
Super funds with Own Occupation options (as of 2026):
UniSuper: Optional Own Occupation TPD for eligible members
AustralianSuper: Choice between Any/Own Occupation (income-based eligibility)
HESTA: Own Occupation available (health professionals only)
Cost difference:
Any Occupation TPD: $80/month
Own Occupation TPD (same fund): $135/month
Difference: 69% more expensive
Why so rare: Super funds prefer group insurance (one-size-fits-all). Own Occupation requires individual underwriting, which defeats the purpose of group insurance.
Recommendation: If you need Own Occupation TPD, retail insurance is usually more competitive and flexible.
Can I get trauma cover through any super funds?
No. Trauma cover is NOT available through any Australian super funds (as of 2026).
Why trauma isn't available in super:
Tax reasons: Trauma conditions don't meet "conditions of release" under super law
Regulatory restrictions: You can only access super for death, terminal illness, or permanent incapacity
Cannot pay while alive and working: Trauma covers heart attacks, cancer, etc. where you're expected to survive and return to work
Your only option for trauma cover: Retail (personal) insurance
How to get trauma cover:
Contact insurance provider directly or use broker
Apply for standalone trauma policy or bundled with life/TPD
Pay premiums from after-tax income
Claims paid tax-free directly to you
Cost for trauma cover (35-year-old, non-smoker):
$200,000 trauma cover: $60-90/month
$500,000 trauma cover: $140-210/month
Take Action: Get the Right Protection for Your Situation
Super only: Young workers under 30, no dependents, severely budget-constrained (but accept significant gaps)
Hybrid (recommended): Most Australians aged 30-55 with families, mortgages, and dependents
Don't wait until you need it - insurance is only available when you're healthy. Take action today to protect your family's financial future.
About This Article
This guide is based on analysis of Product Disclosure Statements from 9 major Australian insurers including AIA Australia, TAL Life Limited, OnePath (Zurich Australia), and Zurich Australian Insurance Limited. All PDS references are current as of January 2026.
Disclaimer: This article provides general information and education only. It does not consider your individual circumstances, financial situation, or needs. You should consider whether insurance is appropriate for you and seek personal advice from a licensed insurance adviser before making any decisions. IMFL is not liable for any decisions made based on this information.
General Advice Warning: Any advice in this article is general advice only and has been prepared without considering your objectives, financial situation or needs. Before acting on any advice, you should consider whether it is appropriate for you having regard to your objectives, financial situation and needs.