INSURANCE THROUGH YOUR SUPERANNUATION

TYPES OF INSURANCE COVER AVAILABLE THROUGH YOUR SUPER

As with a stand-alone policy, the most popular insurance cover available through your superannuation fund is life cover (also known as death cover). Life cover provides a lump sum payment to your beneficiaries as part of the death benefits of this form of insurance. Superannuation life insurance will help your dependants pay for their regular expenses and live life as normally as possible.

INCOME PROTECTION

You can also receive income protection insurance through your super fund. Income protection insurance provides ongoing monthly payments until you recover from a critical illness or injury (or until you reach the maximum benefit period stipulated in your policy).

This payment is typically 75% of your regular income which goes directly into your bank account. These payments provide a bit of a nest egg, which is especially valuable to help overcome the challenges of personal circumstances when you’re unable to work.

It is helpful to note that insurance premiums for superannuation differ in many areas but they all have identical goals – to support your dependants financially while you recoup. You get paid regularly and can take care of monthly expenses like a mortgage.

However, be sure that as an individual investor or as small business owners, that you discuss the salary sacrifice arrangement before committing to a super account or any insurance premiums on related products through this fund.

TPD INSURANCE

Total and permanent disability insurance is the final cover typically available through your super. This type of insurance provides you with a lump sum payment if you sustain a serious disability as a result of injury or illness.

It’s important to note that TPD insurance through your super usually only covers Any Occupation TPD (click here to find out more about the types of TPD insurance cover you can get through your regulated super fund). If you don’t find what you need, contact us for financial advice about trauma cover and personal contributions to participate in TPD insurance).

TRAUMA COVER INSTEAD OF TPD INSURANCE?

If you don’t make use of your TPD insurance benefits via your super fund , you can consider taking out private trauma insurance or critical illness insurance. Contact us for personal financial advice regarding existing trauma insurance policies and new trauma insurance policies available.

These trauma cover policies can increase your monthly income without you having to dip into your super account should you end up with a permanent disability or critical illness. However, you cannot fund trauma insurance through your super fund as you can with TPD.

Ultimately, speaking to the experts about any particular financial product will help you narrow down your own objectives in relation to your retirement planning. Our Wealth Smart experts will walk you through the advantages and disadvantages of trauma insurance and other financial products and how these can fit into your personal circumstances.

Get ahead of the game by exploring your investment options today and make the best investment decisions for your financial situation.

INSURANCE THROUGH YOUR SUPERANNUATION FUND

Choosing your life insurance. trauma insurance, and income protection policies are often big decisions to make – but you may find you’re covered to some extent through your super funds.

Industry superannuation funds typically offer a minimum cover of life insurance with their policies, leaving your loved ones with a much needed death benefit should you pass away unexpectedly. Your life insurance and super account thus increase your cover and may not necessitate a full-blown medical questionnaire and checkup for pre existing conditions beforehand.

There are clear advantages and disadvantages to being insured through your super fund due to bulk discounts and other factors, although cover at a wholesale cost is definitely a welcome benefit.

But are you sure you’re getting the best protection for your situation?

Click on the links below to find out more about:

• Life Insurance through your SMSF
• Income Protection through your SMSF

Not sure whether you should use super fund life insurance or a stand-alone policy?

• Read this article for more information.

INSURANCE THROUGH YOUR SMSF

If you’re running a self managed super fund, it’s safe to say you understand the benefits of customising your investments and tailoring them to meet you and your trustees’ specific needs. Even though you don’t need to take out life insurance through your SMSF, you must still be able to provide evidence that you have considered your SMSF members’ insurance needs.

With the group discounts and tax benefits associated with SMSFs, there are a number of advantages that come with connecting life insurance and income protection to your SMSF.

Click on the links below to find out more about:

• Life Insurance through your SMSF
• Income Protection through your SMSF
• Your insurance responsibilities as an SMSF trustee

BENEFITS OF INSURANCE THROUGH SUPERANNUATION

There are some benefits to having life insurance through your superannuation, not least of which is that many people who wouldn’t otherwise have insurance can secure at least the minimum level of cover because of group discounts.

Because life insurance is bought in bulk by a holding insurance company, it is typically more cost effective. This efficacy helps those looking for an easier cash flow solution to their insurance premiums. Also, payments are taken from the funds accumulated in your super account, leaving those bank savings accounts untouched.

Another advantage is that if your insurance policy is a group policy with a holding insurance company, you may not need to undergo individual medical checks. This is an added benefit of superannuation life insurance since most of the time pre existing conditions can make it difficult to get health insurance.

Of course, this depends on your super fund and the insurance cover you have. It’s best to find out more details from the holding insurance company if you have doubts.

Finally, your premium payments are generally tax-deductible, since they come from any contributions to your super fund. Thus, superannuation insurance is tax-effective.

DISADVANTAGES OF LIFE INSURANCE THROUGH SUPERANNUATION

There are however a number of disadvantages to having your insurance through your super account.

To begin with, you may have a generic policy with a cover that isn’t tailored to what you may want or need. That means what you could receive through a claim might not be enough to meet your household’s demands. But depending on your financial circumstances you can pursue a more comprehensive policy with the planned income and death benefit you want.

It’s important to be aware that any benefit you could receive must first run through your super fund, so your cover takes longer to process.

You also may have less control over your chosen beneficiaries. Sometimes with super funds, you may not have elected a beneficiary. If that’s the case, the trustee of the fund has discretion over who will receive your death benefit, which may not be who you intended.

And finally, premiums can affect your overall retirement savings amounts, by eroding your overall account due to premiums being deducted monthly or annually.

Moreover, clients have many questions regarding the tax implications, withdrawals and balances at different ages in their super funds. Some of these questions revolve around:

• Whether the super funds are deducted from the pre tax income or after other taxes are deducted
• What tax deduction you can expect when you withdraw super funds
• If your super contributions attract a marginal tax rate or if you receive a tax free income when you withdraw super funds
• What tax deduction can you expect on super fund contributions?
• Do you pay less tax on super contributions and withdrawals?
• How much money will you receive at retirement and what portion will be taxable?
• How much money should be in your super balance at each age milestone?
• What investment returns can you expect if you pay extra money into your super or life insurance policy?
• What is the maximum rate of growth that you can expect from your super account?
• What happens to your super in the event of a new members death?

For further comparisons of a super fund life policy as part of a super system and a stand-alone policy, read here.

For general advice and expert guidance regarding the tax implications of a super account in your financial situation, speak to a Wealth Smart consultant.

BENEFITS

DISADVANTAGES

It may be cheaper since it may be bought as a Group policy

The levels of cover can be limited

Your premium payments don’t impact your savings accounts

If you don’t nominate a beneficiary, your super fund decides who receives your death benefit

It’s easy to manage with premiums automatically deducted from your super fund

Premiums deducted monthly or annually can erode your retirement savings

You may not need a health check for your personal situation

You can’t get trauma cover through your super

There can be delays in the payout of your benefits