Group insurance can halve members’ premium costs

Published on
July 21, 2023
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Super fund group insurance premiums can halve members’ premium costs

Super fund members who purchase life insurance through their super fund can save up to 50% on regular premium prices.

These savings are observed when compared to buying similar life insurance directly online, according to a recent study conducted by Rainmaker Information in collaboration with Plan For Life.

"The study confirmed that super fund group insurance provides a cost-effective option for fund members across all age groups and coverage needs,” said Alex Dunnin, executive director of research and compliance at Rainmaker Information.

The study consisted of two core elements:

  1. It assessed the average premium value of MySuper automatic standard cover default insurance, comparing the cost of buying an age-based sum insured through a super fund versus direct purchase.
  1. It evaluated the standardised price of insurance cover for death and total and permanent disability (TPD) cover for three standardised sum insured limits, comparing the average price of super fund purchased voluntary top-up cover versus direct purchase.

At age 40, the price advantage of default super fund group insurance for death and TPD cover was 44%.

Annual savings in buying this insurance through a super fund were found to range from $150 for a 30-year-old, going as high as $680 for a 60-year-old.

Annual premiums for group insurance decreased for super fund members as they aged, however the cost of directly purchased life insurance increased significantly.

Cost of group insurance in superannuation and directly purchased insurance

For a sum insured of $100,000, a 25-year-old super fund member would pay an annual premium of $118, whereas purchasing equivalent life insurance directly would cost $218, resulting in a saving of 46%, or $100 in just one year.

A 50-year-old would pay premiums as high as $840 for direct insurance, while super fund group insurance would cost an average of $600, representing a saving of 30% or $240.

“For a larger sum insured of $500,000, the difference in premiums gets higher in dollar terms,” said Dunnin.

A 25-year-old would pay 37% more in direct insurance annual premiums. The difference in annual premiums was found to be at its minimum for a 50-year-old at 8% but for a 60-year-old the gap climbed to 22%.

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