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What’s the difference between Income Protection through super and a standalone policy?


Considering Income Protection Insurance? Broadly speaking, there are two options: You can either take out a policy with your super fund, or purchase one direct from an insurance provider, like AAMI. But which is better for you?

Why choose income protection insurance through your super fund?

There are some advantages to holding income protection insurance with your super fund, but you should consider whether this is the right option for you.

Pro: Convenient and low cost

One of the biggest advantages of choosing your super fund’s income protection policy is the convenience. Premiums are automatically deducted from your super balance. Because super funds have so many members, they often purchase policies in bulk which can mean lower premiums.

Con: The level of cover may not meet your needs

The downside of insurance held within super is that the policies are usually generic. You don’t have the flexibility to tailor cover to the needs of you or your family. You also need to consider that your insurance cover could end suddenly if you change funds or stop making contributions.

Pro: Tax-effective payments

You can’t claim the cost of your insurance premiums for policies held within your super fund. But any contributions you make to super are taxed at only 15%. This is lower than the income tax rate for some people, so depending on your income, you may still be making a saving.

Con: Reduces your retirement savings

It’s wise to keep a watchful eye on your super balance, as insurance premiums can eat up your retirement savings, and you lose the benefit of that money compounding over time.

Why choose income protection insurance outside super?

If you’re not keen on one-size-fits-all insurance, try shopping around. Here are some of the pros and cons of a standalone policy.

Pro: Comprehensive cover and more features

Policies purchased directly from an insurer generally offer a greater level of cover. Some policies also have unique features, like AAMI’s Comprehensive Income Cover Returning to Work Benefit – a special provision for customers who can return to work, but in a reduced capacity.

Con: Higher premiums

Extensive cover does sometimes have a higher price tag and you’ll need to pay your premiums out of pocket. But because standalone policies are customised, there are ways to meet your budget. For example, you can nominate your claim waiting period and claim benefit period to make premiums more affordable.

Pro: Loyalty perks and discounts

Insurers often provide multiple policy discounts and other perks. At AAMI, our customers also benefit from access to the AAMI Lucky Club. And if you opt to pay your insurance premium annually – then one month of cover is free!

Pro: Tax savings

We all love a fat return at tax time. Customers that hold Income Protection Insurance outside of super can generally claim their insurance premiums as a tax deduction.

Discover AAMI Income Protection Insurance

Want to know more about the benefits of Income Protection? Explore AAMI Income Protection Insurance online, or give us a call on 1300 407 322.

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AAMI Life Insurance, AAMI Income Protection and Accidental Injury Insurance are issued by Asteron Life & Superannuation Limited ABN 87 073 979 530, AFSL 229880 (Asteron) other than the Redundancy Benefit which is issued by AAI Limited ABN 48 005 297 807, AFSL 230859 (AAI) trading as AAMI which is part of the Suncorp Group. Asteron is part of the TAL Dai-ichi Life Australia Pty Limited ABN 97 150 070 483 group of companies (TAL). Asteron is authorised to use the AAMI brand. Suncorp Group is distributor of life insurance provided by TAL. The different entities of TAL and Suncorp are not responsible for, or liable in respect of, products and services provided by the other. AAI trading as AAMI does not provide any financial product advice in relation to AAMI Life Insurance, Accidental Injury and Income Protection (except in relation to the Redundancy Benefit) (Life Products). Any advice on this page in connection with the Life Products is general in nature and is provided by Platform Ventures Pty Ltd ABN 35 626 745 177 AFS Representative Number 001266101 (PV). PV is part of the Suncorp Group and an authorised representative of TAL Direct Pty Limited ABN 39 084 666 017, AFSL 243260 (TAL Direct).