Industry Fund Insurance vs. Retail Insurance: What You Need to Know

Written by Brad Laird

When it comes to protecting your financial future, insurance is a critical component. For many Australians, the decision often comes down to choosing between insurance through an industry super fund and a retail insurance policy. Here's a breakdown to help you make an informed choice.

1. Coverage and Customisation

  • Industry Fund Insurance: Typically offers default group insurance cover, which includes life insurance, total and permanent disability (TPD), and income protection. This cover is generally provided on an "opt-out" basis, making it convenient. However, the level of cover may be generic and not tailored to your specific needs.

  • Retail Insurance: Tends to be purchased through a financial adviser or insurance broker, retail insurance policies are highly customisable. You can tailor the policy to suit your personal circumstances, health status, occupation, and financial obligations. This often results in more comprehensive coverage compared to standard industry fund offerings.

2. Underwriting Process

  • Industry Fund Insurance: Group insurance through super funds often involves minimal or no medical underwriting, making it easier and quicker to obtain. This can be advantageous for individuals with pre-existing health conditions, but it may result in broader exclusions or limitations within the policy.

  • Retail Insurance: Requires full medical underwriting at the time of application. While this process can be more time-consuming and involve medical checks, it provides greater certainty at claim time since the insurer has already assessed your health risks upfront.

3. Cost and Value

  • Industry Fund Insurance:  Premiums automatically deducted from your super balance, premiums may be cost-effective due to the bulk buying arrangement, however because group insurance pools all members together—regardless of health status—healthier individuals may end up subsidising higher-risk members. Additionally, the cover is likely to be less comprehensive.

  • Retail Insurance: While premiums can be higher, they are individually assessed based on factors such as age, health, and lifestyle. This means that if you're in good health (e.g., maintaining a healthy weight and no pre-existing conditions), you may be eligible for lower premiums compared to group insurance through super. Additionally, retail policies often come with more robust features, broader definitions, and greater certainty at claim time due to detailed underwriting.

5. Flexibility and Portability

  • Industry Fund Insurance: Your cover is linked to your super fund. If you switch funds or consolidate accounts, your insurance may lapse or require reapplication.

  • Retail Insurance: Independent of superannuation, making it fully portable regardless of changes to your employment, super fund, or personal circumstances.

Which One Is Right for You?

Choosing between industry fund insurance and retail insurance depends on your personal situation, including your health, financial goals, and family responsibilities. At Salt we're here to help you navigate these choices. If you'd like to review your current insurance arrangements or explore tailored options, don't hesitate to get in touch.

Jenni Anderson