Consolidating your super feels like one of those rare money moves that's all upside. But it could cost you the most valuable benefit you don't know you have.
Every financial adviser, government website and Sunday newspaper money column says the same thing: if you've got multiple super funds, roll them into one. Reduce your fees and simplify your finances.
What almost nobody mentions is what happens to the insurance sitting inside those accounts when you hit "transfer."
The answer is simple, and it catches people off guard: it doesn't come with you.
The Numbers Behind the Advice
The Productivity Commission estimated that unintended duplicate super accounts cost Australians roughly $2.6 billion a year in unnecessary fees. As of 30 June 2025, the Australian Taxation Office reported $18.9 billion in lost and unclaimed super sitting across 7.3 million accounts. Around four million Australians still hold two or more super accounts.
It’s become a real problem as duplicate fees erode retirement savings and lost super gathers dust. Consolidation solves both of these, but it also creates a new problem that doesn't show up on any fee comparison table.
What Actually Happens to Your Insurance
When you roll one fund into another, the money transfers, but the insurance does not. The cover attached to the old account is cancelled the moment the balance leaves and getting equivalent cover in a new fund isn't automatic. If you've developed a health condition since the original policy started, or you're older, or you work in a higher-risk occupation, the new fund may offer reduced cover, exclusions or decline you altogether.
Moneysmart, the federal government's own financial guidance site, warns: "If you change funds, you might not be able to get the same cover. Be particularly careful if you have a pre-existing medical condition or are aged 60 or over."
The Maths Nobody Does
Consider a person with two super funds. One is their current employer's fund, actively receiving contributions. The other is a leftover account from a previous job, charging roughly $200 a year in administration fees.
That $200 in annual fees is a legitimate drag on their retirement savings. Over a decade, it adds up to $2,000, plus the lost investment returns on that money.
But the old account also holds $200,000 in TPD cover, issued years ago when they were younger and healthier. Roll the account over, and that cover vanishes. The fee saving is real, but the gap between saving $200 a year and losing a $200,000 safety net is not a close call.
One compensation law practice recently described a case where a man with a serious disability had multiple super funds and was about to consolidate them all into one account. The intake team caught it and warned him that once you roll it over, the insurance doesn't roll with it. He kept the accounts open. His TPD claims across those funds were worth multiples of what he would have saved in fees over a lifetime.
Who's Most at Risk
Three groups are particularly exposed:
People who changed jobs in their 20s and 30s often have dormant super accounts from old employers. Those accounts may hold insurance policies issued without health checks, simply because they were young and employed at the time. That frictionless cover becomes impossible to replicate once health changes.
Anyone with a pre-existing condition faces the sharpest risk. A new fund will usually assess health before issuing cover. Conditions that didn't exist when the original policy was issued, including mental health conditions, can result in exclusions or refusal. ASFA's 2025 research found that mental health TPD claims have significantly risen, leaving more people than ever before at risk.
Workers over 60 face age-based limits. Many funds reduce or cease TPD cover at 65. If you consolidate out of a fund that still covers you, you may not find equivalent cover elsewhere.
The Law That Made It Worse
In 2019, the federal government introduced the Protecting Your Super Package, legislation designed to stop inactive accounts from being eaten by fees and unwanted insurance premiums.
Under these rules, if no contributions or rollovers hit your account for a continuous period of 16 months, your super fund must cancel your insurance automatically, unless you've opted in to keep it.
In practice, it means Australians who change jobs, take parental leave, travel, go through illness or simply stop contributing to a secondary fund for just over a year can lose their insurance without realising it. The fund must send notices at 9, 12 and 15 months of inactivity. But those notices go to the email or postal address on file, which, for a forgotten super account, is often out of date. Luckily, there are ways you can trace any lost or forgotten super accounts.
What You Can Actually Do
This is a five-minute check that could be worth six figures.
- Log in to myGov and link your ATO account. The ATO's online services will show every super fund you're connected to, including ones you've forgotten.
- Call each fund and ask three questions. What TPD cover do I have? What death and income protection cover do I have? What would happen to that cover if I rolled out?
- Compare the cover, not just the fees. A fund with higher fees but $200,000 in TPD cover may be worth keeping open, especially if you couldn't get that cover elsewhere.
- If you have a health condition, do not consolidate without advice. A licensed financial adviser can assess whether your existing cover is replaceable. If it isn't, the old account stays open.
- If an account has been inactive, make a small contribution. Even a $10 voluntary contribution resets the 16-month inactivity clock under the Protecting Your Super rules, keeping your insurance alive.
Australians are told to consolidate their super as though it were a simple administrative task. For many, it is, but for anyone who might one day need to make a disability claim, which nobody plans to do, that rollover could erase the one financial safety net they didn't know they had. The five minutes it takes to check could be the most consequential financial decision of the year.
