Life and disability insurance bought through your super fund can be a low-cost way to protect your family if disaster strikes and you die or can’t work.

It often costs less than buying cover separately because super funds have the buying power to negotiate a great bulk deal for their members.

These types of insurance can provide income at times of great personal upheaval and relieve you and your family of worries about how to pay the bills.

But Justin McMinn, Executive – Advice Strategy at industry super fund HESTA, cautioned that there is no one-size-fits-all way to choose a level of cover.

“It will depend on what you can afford and your personal circumstances.”

A good place to start is by using online calculators and reviewing your cover regularly, Mr McMinn said.

What does life insurance cover?

If you die, life insurance pays a lump sum to a beneficiary nominated by you, although the fund’s trustees may have discretion over this.

If the worst happens, your beneficiary will receive a payment that they can use to pay off debts, such as your credit card and the mortgage, or use for living expenses.

If it’s likely to be an issue about who gets the money, you should check if you can make a binding nomination so the payment is made in accordance with your wishes.

Disability insurance

Total and permanent disability insurance provides a payment or income stream that you can use to pay off debt and retrain if you can no longer do your job.

It’s important to understand what is covered, because policies differ.

Some cover you if you cannot work in your usual occupation while others provide cover if you cannot work at all.

Protecting your income

Income protection insurance replaces your income, generally by between 75 and 85 per cent, for a set period if you are too ill to work.

When considering levels of cover, it’s important to check your sick leave entitlements.

There is a waiting period before the cover kicks in and you can cut the cost of your insurance by nominating a longer waiting time if you can use up sick and other leave. You may also reduce your premium by choosing a lower level of cover if you can afford to receive a lower payment.

Apart from payments, this insurance can also provide specialist support to help you recover and get back to work.

How much cover do you need?

Someone with a young family may decide to buy a higher level of protection for the years when their mortgage and expenses are high.

HESTA spokesman Mr McMinn pointed out that if you are looking to increase your cover, you need to remember the insurance premiums come out of your super so may reduce the amount you have at retirement.

As you get older your risk of illness increases and your cost of insurance will rise but you may reduce your cover because your children are independent and you’ve paid down debt and built up savings.

These insurances are designed to help when disaster strikes, so it’s worth making the effort to ensure you have the right cover for your circumstances.