A 44 year old takes eighteen months out of work to care for a parent. No salary, so no employer contributions land in her super. Sixteen months in, her fund cancels the life, total and permanent disability, and income protection cover that had been attached to that account for eleven years.
She receives letters about it. They arrive alongside everything else during a difficult period and she does not open them closely. Two years later she is diagnosed with a serious illness, goes to claim on the TPD cover she has been paying for since her twenties, and finds there is nothing there.
This is not a rare edge case. Around five million superannuation accounts lost insurance cover following the 2019 reforms, and the number of lives insured through super fell by roughly 36 per cent between June 2018 and June 2023. Industry bodies have since warned that the changes left significant numbers of people uncovered without realising it.
The rules were introduced for a good reason. But they operate automatically, they catch people at predictable life stages, and the fix takes about ten minutes if you know it exists.
Three separate rules that switch cover off
| Rule | What triggers it | How to prevent it |
|---|---|---|
| Inactivity | No contribution or rollover into the account for 16 consecutive months | Make an election to keep your cover, or make a contribution or rollover |
| Under 25 | New member aged under 25, so no default cover is provided | Opt in to cover with the fund |
| Low balance | Account balance has not reached $6,000 | Opt in, or build the balance above $6,000 |
They are separate rules with separate triggers, and a person can be caught by more than one. A 23 year old with a $4,000 balance is caught by two of them at once.
The inactivity rule
Under the Protecting Your Super package, from 1 July 2019 a super fund trustee must not provide insurance cover on an account that has been inactive for 16 months, unless the member has elected to keep it. The obligation sits in the Superannuation Industry (Supervision) Act.
Three details decide whether this affects you.
Inactive means no money coming in, not no logging in. An account is inactive if it has not received a contribution or a rollover for 16 consecutive months. Checking your balance, updating your details or changing your investment option does not reset the clock. Only money arriving does.
Any contribution restarts the count. A single employer contribution, a personal contribution or a rollover from another fund resets the 16 months from that date.
You will be written to at 9, 12 and 15 months. Funds must notify members approaching inactivity and give them the chance to keep the cover. Those letters are the warning system, and they are also the reason this is preventable. If your super fund writes to you about your insurance, open it.
Some funds have their own rules that operate on a shorter period than 16 months, and cover can also cease under the policy terms before the legislative cancellation applies. Your fund’s insurance guide is the document that tells you which applies to you.
The under 25 and low balance rules
The Putting Members’ Interests First reforms, which took effect from 1 April 2020, work differently. Rather than cancelling existing cover, they stop cover being provided automatically in the first place.
A fund generally cannot provide insurance on an opt-out basis where the member is a new member under 25, or where the account balance is below $6,000. In both cases the member has to opt in for cover to start.
For members aged 25 or over, automatic cover can switch on once the balance reaches $6,000 through contributions or rollovers. Some funds also cancel cover if a balance falls back below $6,000, depending on their rules.
There is an exception for members in prescribed dangerous occupations, where funds may provide default cover to younger members. Construction is the common example, and it exists precisely because the people most likely to need TPD cover early are often the youngest workers on the riskiest sites. If you work in a trade, check whether your fund applies it.
The other ways cover stops
- Not enough money to pay the premium. If the balance cannot cover the premium, cover generally lapses regardless of the rules above.
- Transfer to the ATO. An account that is inactive for 16 months with a balance under $6,000 is transferred to the ATO. The money is not lost, but you cease to be a member of that fund and any insurance attached to it goes with the membership.
- Policy or trust deed terms. Cover can cease under the insurance policy or the fund’s governing rules, sometimes on shorter timeframes than the legislation requires.
Who is most at risk
The rules do not target anyone. They simply catch whoever stops receiving contributions, which turns out to be a very specific and largely predictable set of people:
- Parental leave and carer’s leave. Often the exact period when a family most needs the cover in place.
- Anyone off work long term through illness or injury. Discussed below, because it is the cruellest version.
- Self-employed people and contractors who do not pay themselves regular super. Our guide on income protection for the self-employed covers the broader gap.
- People who changed jobs. New employer, new fund, and the old account holding the good cover quietly goes dormant.
- People working overseas with no Australian employer contributions.
- Semi-retired and part-time workers whose contributions have slowed or stopped.
- Under 25s and anyone with a balance under $6,000, including students and casual workers.
- Anyone taking a career break. Our guide on superannuation and the career break deals with the balance side of that decision, but the insurance side is the more urgent one.
The timing problem nobody designed but everybody should know about
Consider what happens to someone who becomes seriously ill or is injured and stops working.
Their salary stops, so employer contributions stop. The account goes quiet. Sixteen months later, the insurance is cancelled. They are now uninsured at precisely the point in their life when TPD or income protection cover matters most, and they will not qualify for new cover because of the condition that stopped them working.
If a claim event has already occurred, cancellation of cover afterwards does not necessarily extinguish a valid claim, and anyone in that position should get advice rather than assume the worst. But the safer and simpler answer is to not let it happen. If you or someone in your household stops working through illness or injury, checking the insurance on every super account is one of the first administrative jobs, not something to get to later.
Our guides on what TPD cover actually does and how to make a life insurance or TPD claim cover what is at stake.
The consolidation trap
Consolidating super is usually sensible. One account, one set of fees, one thing to keep track of. It is also one of the most common ways people accidentally destroy valuable insurance.
When you roll one fund into another, the old account closes and any insurance attached to it ends. That old cover may be better than what you are rolling into. Older policies frequently have more generous definitions, no exclusions, cover you were underwritten for years ago when you were healthier, or occupational categories that no longer apply to you.
The rule is straightforward and almost nobody follows it: check what insurance is attached to every account before you consolidate, not after. Where the old cover is worth keeping, options can include leaving enough in the old fund and making an election to maintain the cover, or arranging equivalent cover in the receiving fund and having it accepted before closing anything.
Our guides on when consolidating super helps and when it hurts and how to consolidate your super deal with the process. The insurance check is the step to do first.
Why getting cover back is harder than losing it
Losing cover is automatic. Getting it back is not.
Once cover has been cancelled, reinstating it or taking out new cover is generally subject to assessment and approval by the fund and its insurer. That means underwriting: health questions, possibly medical evidence, and an assessment of your occupation and pastimes.
The consequences depend entirely on what has happened in the meantime. A condition diagnosed since the original cover started can be excluded, or attract a loaded premium, or result in cover being declined. The cover you had automatically, with no questions asked, is not the cover you can necessarily get back.
This asymmetry is the whole reason the article exists. Sixteen months of silence costs you something that money alone cannot buy back. And when you do apply for new cover, the disclosure obligations matter, as our guide on your duty to take reasonable care explains.
What to do this week
- Find every super account you have. Check through myGov and the ATO, which will show accounts you have forgotten.
- For each one, find out what insurance is attached and whether it is currently active. Not what it was, what it is now.
- Check the last date a contribution or rollover was received. That is the date the 16 month clock started.
- If any account is heading towards inactivity and you want the cover, make an election to keep it. Most funds have an online form. It is free and takes minutes.
- If you are under 25 or your balance is under $6,000 and you need cover, opt in. It will not start by itself.
- Check whether the cover is worth keeping at all. The rules exist because premiums on duplicate cover across several accounts erode balances for nothing. Cover you cannot claim on twice is cover you should not pay for twice.
- Open the letters. Notifications at 9, 12 and 15 months are the system working. It only fails if nobody reads them.
- Check your beneficiary nominations while you are there, since an expired nomination undoes the plan just as effectively. Our guide on binding, non-binding and reversionary nominations covers it.
Does payday super change this?
Partly, and only for some people.
From 1 July 2026, employers are required to pay superannuation at the same time as salary and wages rather than quarterly. For employees in continuous work, that means contributions arriving every pay cycle, and an account that will not drift into inactivity while the job continues.
It does nothing for the groups most at risk. Someone on unpaid leave, out of work through illness, self-employed, working overseas or retired still receives nothing, and their 16 month clock runs exactly as before. It also does nothing about the old fund you stopped contributing to when you changed jobs. Our guide on payday super from 2026 sets out what does change.
Where Professional Advice Adds Value
This is one of the few areas where a short review has a clearly asymmetric payoff. Checking takes an hour. Discovering the problem at claim time costs a household hundreds of thousands of dollars.
At Money Path the work usually covers four things. Identifying every account and what cover sits on each, because people routinely have more accounts than they think and the good cover is often on the forgotten one. Working out whether the cover is appropriate at all, since duplicated or unnecessary cover quietly erodes balances and cancelling some of it is sometimes the right answer. Sequencing any consolidation so that insurance is protected before accounts are closed, which is the single most valuable step in this whole article. And checking the cover against what the household actually needs, which is a different question from whether it happens to exist.
The broader question of whether life cover belongs inside super at all is dealt with in our guide on life insurance inside or outside superannuation. The automatic cancellation rules described here are one genuine argument on the “outside” side of that ledger, because a policy you pay for directly does not switch itself off because your employment changed.
Frequently asked questions
Why was my insurance cancelled in my super account?
Most likely because the account received no contribution or rollover for 16 consecutive months, which requires the trustee to cancel the cover unless you elected to keep it. Cover can also stop because you are a new member under 25, because the balance has not reached $6,000, because there was not enough money to pay the premium, or under the fund’s own rules.
What counts as an inactive super account?
An account that has not received a contribution or rollover for 16 consecutive months. Logging in, checking your balance or changing your investment option does not count. Any contribution or rollover restarts the 16 month period from that date.
How do I stop my insurance being cancelled?
Make a written election to your fund to keep your cover, which most funds allow online and which is free. Alternatively, make a contribution or roll money in, which resets the inactivity period. Funds must write to you at 9, 12 and 15 months of inactivity, so those letters are your warning.
Can I get the cover back after it is cancelled?
Sometimes, but not automatically. New or reinstated cover is generally subject to assessment and approval by the fund and its insurer, which means health questions and underwriting. Any condition that has developed since the original cover started may be excluded, loaded or result in the application being declined.
Why do people under 25 not get automatic insurance?
Under the Putting Members’ Interests First rules, funds generally cannot provide cover on an opt-out basis to new members under 25 or where the balance is below $6,000, because premiums were eroding small balances for cover many members did not need. You can opt in. There is an exception allowing default cover for members in prescribed dangerous occupations.
Will consolidating my super cancel my insurance?
Yes, on the account you close. Any insurance attached to the old account ends when it is rolled over, and that cover may be better than what you are moving into, particularly if it is older or was underwritten when you were healthier. Always check the insurance on every account before consolidating, not after.
Does payday super mean my account cannot go inactive?
Only while you are employed. From 1 July 2026 employers pay super with each pay cycle, so continuously employed people should not drift into inactivity. It does not help anyone on unpaid leave, out of work through illness, self-employed, working overseas or retired, and it does not help a former fund that no longer receives contributions.
Taking the next step
Log in to myGov, look at every super account you hold, and check two things on each: what insurance is attached, and when money last went in. If any account you rely on for cover has been quiet for more than a year, make the election to keep the cover before the sixteenth month.
It is a short job with a very large downside if it is skipped.
General advice warning: This article contains general information only. It does not take into account your objectives, financial situation or needs. Insurance arrangements differ between superannuation funds, and individual policy terms, trust deeds and fund rules can operate differently and sometimes on shorter timeframes than the legislation requires. Whether cover suits you depends on your circumstances, and in some cases cancelling duplicated cover is appropriate. Check your position with your fund and read the relevant insurance guide, and seek personal advice from a licensed financial adviser before taking out, changing or cancelling insurance or consolidating superannuation accounts.
