When you roll over or consolidate your super, any insurance attached to your old fund does not transfer with your balance.
This may include:
- TPD insurance (Total and Permanent Disability cover)
- Income protection insurance
- Death benefit cover
If you close a super account, the insurance linked to that account is usually cancelled. Once cancelled, you generally cannot reinstate the policy through your old fund.
Understanding How Insurance Works Inside Your Super
Your insurance is tied to the fund, not to you
Most Australians have some form of insurance inside their superannuation and many don’t even realise it.
Your super fund uses a portion of your balance to pay premiums for TPD, life insurance (death benefit), and sometimes income protection cover.
This insurance belongs to the fund's group policy. It is not a personal policy that follows you.
When you close the account or roll the balance over to another fund, the insurance ends. The new fund does not inherit the old fund's cover.
What 'consolidation' actually does to your cover
Consolidation means moving multiple super balances into a single fund. The Australian Taxation Office (ATO) and the government actively encourage this to reduce duplicate fees. It often makes financial sense.
But here’s the issue: the ATO's consolidation tools don’t check whether you hold insurance in the funds being closed.
Moneysmart.gov.au warns that consolidating your super doesn’t automatically transfer any insurance cover you have with your other super fund or funds.
Why this matters for TPD claims
If a serious injury or illness leaves you unable to work, a TPD claim through your super could provide a significant lump-sum payment.
However, the claim is made against the insurance policy that was active when you became disabled. If you rolled over that super fund and the policy was cancelled, you may no longer have a valid policy to claim against.
We regularly speak to people who have unknowingly lost their TPD insurance cover by consolidating their super. It is one of the most common and most preventable mistakes we see.
The Protecting Your Super Package and the 16-Month Rule
What changed in 2019?
The Protecting Your Superannuation Package introduced rules to stop inactive super accounts from being eroded by insurance premiums and fees.
Under section 68AAA, a super fund cannot maintain insurance on an account that has been inactive for a continuous period of 16 months.
An account is considered 'inactive' if it has received no contributions or rollovers during that time.
How does the inactivity clock work?
The 16-month countdown starts from the date of your last contribution or rollover into the fund. If you make a contribution at any point, the clock resets.
Your fund is required to send you written notices at 9 months, 12 months, and 15 months of inactivity. These notices warn you that your insurance will be cancelled and give you the option to opt in to keep it.
If you do nothing after the 15-month notice, your insurance is cancelled at the 16-month mark and no further warning is given.
Who is most at risk of the 16-month rule?
- Sole traders and self-employed people who do not make regular super contributions
- Casual workers with gaps between jobs
- People on parental leave or extended unpaid leave
- Anyone between jobs for more than a year
- People with old super accounts from previous employers who are no longer receiving contributions
The 'Opt In' Email: What It Means and What to Do
Do not ignore this message. If you have any chance of needing to make a TPD claim now or in the future, opting in keeps your cover active.
Contact your super fund before the deadline to confirm whether you want to keep the cover. Failing to act could result in the permanent loss of valuable TPD, income protection, or death benefit insurance.
If you have already missed the deadline and your insurance was cancelled, contact your fund immediately. Some funds have reinstatement processes, though these are not guaranteed and may require a health assessment.
Successor Fund Transfers vs Voluntary Rollovers
There is an important difference between a voluntary rollover (where you choose to transfer your super to another fund) and a successor fund transfer (where your fund merges with another fund).
What to Do Before You Consolidate
If you’re thinking about rolling over or consolidating your super, take these steps first:
- Contact every super fund you hold and confirm whether the account includes TPD insurance, income protection, or death benefit cover, along with the insured amounts and premiums.
- Compare the cover across funds. One fund may offer significantly better TPD cover than another, especially if you joined at a younger age or when your health was better.
- Apply for cover in your chosen fund first. If your destination fund offers insurance, apply for it and wait for written confirmation that your new cover has started before closing any other accounts.
- Check for pre-existing condition exclusions. A new fund may exclude conditions you already have. Your old fund's cover may not have those exclusions if you joined before the condition arose.
- Do not close any account until your new cover is confirmed in writing. This is the single most important step.
- If you are already injured or unwell, do not consolidate anything. Speak to a TPD lawyer before making any changes to your super.
If you have multiple super accounts that include insurance, it’s sometimes better to keep them open and pay the premiums rather than risk losing valuable cover.
Read our article on Claiming Both TPD and Income Protection
Common Scenarios and Questions
Is it too late to make a TPD claim if I consolidated my super years ago?
Not necessarily. You may still be able to make a TPD claim after consolidating your super.
- Contact your old fund and ask whether TPD insurance was in place when you rolled over.
- A claim may still be possible if your disability arose while the policy was active, even if the account has since been closed.
- A TPD lawyer can review your circumstances and advise on your options. You can also find lost super TPD insurance through our guided process.
What should I do if my super fund sent me an insurance letter?
Read it carefully. This may be a warning that your insurance is about to be cancelled.
- Review the notice and note the deadline.
- Contact your fund before the cut-off date to keep your insurance active.
- Consider making a contribution to prevent cancellation due to inactivity. Even a small payment can work.
Is my super insurance still active if I haven't worked for months?
It depends. It may still be active, but there are several factors at play.
- Funds generally cancel insurance after 16 months of inactivity unless you've opted in.
- Contact your fund to check your status.
- If you're within the inactivity period, consider opting in or making a voluntary contribution to maintain your cover.
Am I covered if I'm self-employed and don't make regular super contributions?
Self-employed people are especially vulnerable to losing their insurance cover due to the timeframes involved.
- If you haven't contributed to your super for 16 months, your insurance may have lapsed.
- Contact your fund to check your insurance cover status.
- Consider setting up regular voluntary contributions to help keep your cover active.
Can I get my old insurance back after consolidating?
In most cases, cancelled insurance cannot be reinstated.
- Once your old super account is closed and the insurance is cancelled, the cover usually ends permanently.
- Some funds offer limited reinstatement periods, but these often require a new health assessment.
- Any new cover may exclude pre-existing medical conditions.
Should I keep TPD insurance in multiple super funds?
It may be worth keeping multiple TPD policies if you can afford the premiums.
- In many cases, each TPD policy can be claimed separately if you become totally and permanently disabled.
- Consolidating into one fund may result in less coverage.
- Consider both the cost and the benefits before making a decision.
Watch Out for These Red Flags
Look out for these issues. They can put your TPD at risk:
- You receive a letter or email from your super fund about 'inactive account' changes to your insurance.
- You have not made a super contribution in more than 12 months.
- You are about to consolidate your super through myGov or the ATO's online tools without checking existing insurance details first.
- A financial adviser recommends consolidation without discussing your insurance cover in each fund.
- You are injured or unwell and someone suggests rolling your super into one account.
- Losing the insurance component through consolidation could lead to major losses.
When to Get Legal Advice
Speak to a TPD lawyer before making any changes to your super if:
- You are injured, unwell, or unable to work and have not lodged a TPD claim
- You think you may have had TPD insurance in a super fund you previously closed
- Your insurance was cancelled due to inactivity and you were already disabled beforehand
- You are unsure whether you have TPD insurance or which fund it is with
- Your TPD claim was denied and you believe cover should have been in place
Seeking early advice is important. TPD claims are generally assessed against the insurance policy that was active when you became disabled. Delays can make it harder to obtain medical records, employment evidence, and super fund documents.
Key Takeaways
- Insurance does not transfer when you roll over your super. TPD, income protection, and death benefit cover are tied to the fund, not to you. Close the account and the insurance ends.
- The 16-month inactivity rule can cancel your cover without you realising. If no contributions have been made for 16 months, your fund must cancel your insurance unless you opt in to keep it.
- Always call each fund and ask about insurance before consolidating. This single step can prevent the loss of a TPD claim worth potentially hundreds of thousands of dollars.
- If you are already injured or unwell, do not change your super without legal advice. Any changes to your super could affect your right to claim.
- It may not be too late if you have already consolidated. Contact your old fund and speak to a TPD lawyer to check whether a claim is still possible.
Get Help Now
If you’re concerned about any of the issues raised in this article, a member of our team can assist by reviewing your super funds, checking whether you have TPD insurance cover and explaining clearly the options that are available to you. Smith’s Lawyers has dedicated TPD specialists with years of experience in helping people get the most out of their super.
Contact Smith's Lawyers today:
- Call 1800 960 482 for a free, no-obligation consultation about your situation
- No upfront costs: We operate on a No Win, No Fee, No Catch® basis
- Or request a call back: Use the form below to have our experienced team get in touch at a time that’s convenient for you.
