A life insurance policy is a contract with an insurance company. In exchange for each life insurance premium, the insurance company provides you with life insurance cover. Upon your death, the insurance company pays a lump-sum payment to your elected beneficiaries, known as a death benefit.
There are several different types of life insurance available, and some are designed to meet other financial needs that you may have. For example, some life insurance policies contain cash value components that you can use during your lifetime if necessary. However, most term life insurance policies do not contain cash value components.
Most people buy life insurance to protect their loved ones in the event of their death, which has many benefits. Life insurance proceeds can pay off mortgages, help send children to college, support a surviving spouse’s retirement, or pay for funeral and other expenses.
WHO NEEDS ONLINE LIFE INSURANCE AND WHY?
Life insurance is a financial tool with a specific purpose. Life insurance Australia is for people with dependents who often need financial assistance when you pass away such as spouses, children, parents, siblings and sometimes, even friends.
Here are some of the major reasons why people buy life insurance:
- To pay off debts and protect the financial security of a spouse or other dependents after your death.
- To pay for burial and estate settlement expenses.
- To provide for the education of children
- To provide funds to replace your income if you die prematurely.
There are many other reasons why consumers purchase the best life insurance cover. But these few are enough to give you an idea of the seriousness of this type of investment in the wellbeing of your loved ones.
TYPES OF LIFE INSURANCE POLICIES
A Life Insurance policy can contain several different types of insurance, and you can bundle them into a comprehensive package or choose just one or two features. Under the umbrella of life insurance, you may include income protection, trauma, and business expense cover, or TPD insurance among others. Next, we will explain these different life insurance products and what financial support they offer to you and your loved ones.
A key aspect of Life Insurance is Life Cover. Also known as Term Life cover or Term Life insurance, life cover is an agreement to pay a lump sum of up to $1 million or more in the event of your death or diagnosis of a terminal illness.
A terminal illness is defined as a medical condition from which you are expected to die within 12 months (as assessed by a medical practitioner), thereby making you eligible for an advance payment. A life insurance cover is your family’s defense against financial emergencies that may arise at your demise. Each term life insurance comes with a different life insurance premium and their benefits vary too.
Before deciding to buy life insurance, you need to check if you already hold it through a super fund offer. If this is the case, keep in mind that packaged life cover, although cheaper, may be reduced by any amount paid on other claims in the package (TPD or trauma).
When you compare life insurance offers, you must consider several factors such as:
- Benefits and insurance policy features
- Waiting periods before making a life cover claim
- Limits on cover
- Cost of the insurance premiums
Enter Wealth Smart. As your online life insurance advisors. Our job is to compare attributes, gains, and riders in different insurance policies to help tide you over unexpected financial challenges in the face of an untimely death or terminal illness. Do not hesitate to contact us and get all your life insurance questions answered.
Income protection insurance provides up to 75% of your income if you find yourself unable to work because of serious illness or injury. Life insurance providers design it to offer far-reaching impacts. It can help you focus on rest and recovery without worrying about your financial situation, including debt repayments and other living expenses for you and your dependents.
Every income protection policy comes with a specific definition of partial or total disability, so it is highly recommended to check the relevant product disclosure statement before making a claim.
TOTAL PERMANENT DISABILITY (TPD) INSURANCE
Total and Permanent Disability (TPD) insurance pays a lump sum payment if you become totally and permanently disabled and are unable to work again. It is one of the most popular life insurance products and comes with many benefits. It can help cover rehabilitation costs, debt repayments, and daily living expenses for you and your dependents.
HOW TO BUY TOTAL AND PERMANENT DISABILITY INSURANCE
TPD insurance can be acquired separately or packed with life cover. In many cases, you may already hold a TPD cover that is cheaper than purchased directly. However, if the TPD cover is packaged, your life cover may be reduced by any amount paid out on a TPD claim.
You can buy TPD insurance separately from a financial adviser, an insurance specialist, or an insurance company. The details typically requested by the insurers when you purchase a TPD cover are:
- Medical history (including a family history of disease)
- Lifestyle (for example, they might want to know if you are a smoker)
- If you practice extreme sports or you have high-risk hobbies
TRAUMA (CRITICAL ILLNESS) INSURANCE
As a result of illness, you may need extended time off work. Standard income protection insurance and life insurance may not cover the accumulating costs associated with recovery mingled with everyday expenses. After taking out the best term life insurance with a return of premium, getting trauma insurance is the next logical step.
Trauma insurance, also known as critical illness insurance, provides a lump sum payment on the diagnosis of a serious medical condition. It can help cover medical care expenses as well as contribute to paying off your debts, including a mortgage or credit card debts. Simply put, critical illness cover protects you from financial hardship in case of severe medical issues.
When deciding how much life insurance you may need and what types of life insurance better suit your need, make sure you know just what illnesses are covered by trauma.
Trauma insurance is different from life insurance in that it responds only to certain “trauma” events – life insurance will pay out at any time when the policyholder dies. A single life insurance policy can therefore provide both trauma and life cover within one package – but it’s worth checking whether you can or should get both policies through your insurer. That is why we have trauma life insurance cover, life TPD and trauma cover, and others.
The benefits of trauma insurance:
- Pays a lump sum benefit if you are diagnosed with one of the specified conditions listed in your life insurance cover policy.
- Helps protect you from the financial impact of serious illness so you can focus on getting better.
- Trauma insurance can provide peace of mind so that if you were to suffer a serious health event, you could access funds quickly. This access could enable you to obtain the treatment or support you need as soon as possible, without having to worry about finances or how they will impact your lifestyle.
- These payments can also help you avoid taking on debt during this time.
Trauma insurance is designed to provide financial assistance for medical costs, mortgage payments, and other commitments. It is used for treatment, rehabilitation or to maintain your lifestyle, so you can focus on regaining your health.
TRAUMA INSURANCE AND LIFE INSURANCE
TPD (Total and Permanent Disability) insurance is designed to ensure your financial protection if you become totally and permanently disabled.
In other words, TPD is advisable should you become unable to work again due to illness or injury,
Such a policy provides you with a lump sum payment so that you and your family can maintain your current lifestyle despite the loss of income from being unable to work. The amount of cover you choose is up to you, however, it is worth considering whether your chosen benefit amount will be enough for you and your family to continue living in the same way as before your injury or illness occurred.
When selecting your TPD cover, it is important to consider:
- What your monthly expenses will be when you can’t work anymore, such as loans or credit card repayments.
- Your current savings and investments.
- Your superannuation balances.
- Any other income or benefits that may be available to you.
- Your family situation (whether or not you are a single parent).
We are Australia’s best life insurance specialists and suggest the most suitable life covers and living life insurance services to choose from. You can take advantage of our comprehensive life insurance services to build a safe life for yourself and your loved ones. Don’t hesitate to call us on 1800 765 100.
LIFE INSURANCE COMPARISONS
TIPS FOR FINDING THE BEST LIFE INSURANCE COVER
Choosing a life insurance policy requires careful consideration. Before you begin your search, ask yourself these questions:
- What will my family need to maintain their standard of living if I am no longer there?
- How much am I willing to spend on life insurance premiums?
- Who will receive the proceeds?
- Do I need the coverage to last only a certain period of time (term), or should it cover me until I die (permanent)?
- Do I want the policy to build cash value that I can access while I’m alive?
- Am I in good health (or do I have any health issues that might affect my ability to get online life insurance coverage)?
Once you answer these questions, you will have a better understanding of what type of life insurance cover you need. You may also be a small business owner who wants to take out a life insurance policy. Either way, you should browse through the remainder of this article for a better appreciation of the best life insurance available from Wealth Smart.
BUSINESS LIFE INSURANCE
Your business will most likely be involved with many different types of risks. You will need to answer many questions about the types of risks that you may run into. If you’re selling products, then your business will probably be involved in product liability. If you’re a real estate agent, then you might have to deal with property damage claims.
If you’re a restaurant owner, then fire is one of the main risks that your business may face. Ultimately, business owners face multiple risks that require the support of the best life insurance possible, so you should assess your business risks personally or contact a Wealth Smart consultant for help.
If you want to do a preliminary risk assessment, a good way to determine your company’s risk exposure is to ask yourself these five questions:
- Who are my clients? Knowing who your clients are will help you understand the kinds of risks your business faces in its day-to-day activities. Once you identify business clients, you can better assess the risks that may affect your customers, employees, and even suppliers.
- What are my customer relationships like? You need to know if you have multiple customers for each product or service that you sell. This will help you calculate what percentage of customers are affected by various risks and their impact on buying decisions. You’ll also want to know how many customers are affected
- Business type: Is your business classified as an S or C corporation? The type of business you own and manage also impact your risk. A Wealth Smart consultant can run through your options for the best life insurance cover and other insurance policies to support your business and safeguard it from possible risks.
- Insured amount: The more assets you have and the more valuable your business, the higher amount of coverage you should have. For example, self-employed individuals usually have lower coverage needs than employees of companies with more than $10 million in annual sales.
- Company age: A young company may not need as much life insurance cover or other policy coverage as an established business that has been around for several years. The younger the company, the smaller is its chance of having high liabilities (such as high employee turnover or poor business decisions).
After answering these questions, explore our business insurance options or contact a Wealth Smart insurance specialist for more information.
COUPLES LIFE INSURANCE AUSTRALIA
Wealth Smart offers a variety of personal best life insurance cover in the form of couples insurance. You can explore insurance policies for your married couples, unmarried couple insurance options, and many others that deliver the best value to you and your partner or for you as an individual. Get in touch with our team for inquiry.
LIFE INSURANCE FOR YOUNG MARRIED COUPLES
When you get married and begin a family, your income plays a key role in keeping your household financially stable.
A stable financial future often depends on both partners’ health and earning power. Life insurance protects this security by covering all or part of the financial needs if one partner dies. It can provide the money to help pay for living expenses, education, and other essentials.
The benefits of life insurance for young couples:
There are several reasons why life insurance is particularly important for young married couples. These include:
- Providing funds to pay final expenses and debts, including medical bills.
- Covering costs related to housing.
- Protecting children’s futures by providing funds for their education, care, and upbringing.
- Allowing loved ones to maintain their standard of living.
- Paying off outstanding debts such as credit card balances, car loans, student loans or home equity loans.
- Providing funds for emergencies or unexpected expenses that arise after death, such as legal fees or estate taxes.
JOINT LIFE INSURANCE FOR MARRIED COUPLES
Married couples can get a joint life insurance policy covering both partners under one policy. The application process can be more straightforward than taking out separate policies, and it can save you money in the long run.
Joint life insurance policies are generally taken out by married couples who want to protect their partner with the same life insurance policy. Joint life insurance is also an option for unmarried couples living together.
There are two types of joint life insurance options: joint first-to-die and joint second-to-die. A joint first-to-die policy pays out when the first person named on the policy passes away. A joint second-to-die policy pays out when the surviving partner passes away.
There are several advantages to taking out a joint life insurance policy:
- It saves time as you only need to complete one application and attend one medical exam.
- It saves money as insurers will usually charge less for a joint policy than two separate single policies.
- It protects both partners without requiring each of them to take out their own life insurance policy.
TERM LIFE INSURANCE FOR MARRIED COUPLES
Term life insurance is the most basic and affordable form of permanent life insurance as it pays out only if the person passes away during their policy period. This type of life insurance cover is a great option for families with young children and mortgages to pay, because it provides them with a financial cushion in case of the unexpected.
Term life insurance can also be a good choice for couples looking for affordable protection for the early years of their marriage when they’re still building up their assets.
Term life insurance is a great choice for couples looking for:
- Affordable protection during the ‘raise your family’ years.
- A way to provide income while your spouse or children are growing up.
- A way to pay off your mortgage or other debts in case of death.
- The freedom to update your life insurance cover as your needs change.
LIFE INSURANCE FOR UNMARRIED COUPLES
Unmarried couples may face many of the same challenges that married couples do, but they often do not have the legal protections afforded to those who are married. Therefore, unmarried couples should ensure that they legally protect their assets, providing clear instructions about how these should be dealt with if one partner passes away, for example:
- When a person dies without a valid will, their assets will be distributed according to statutory rules that may not reflect their wishes. If you and your partner want to make sure your assets go where you intend them to, then both partners must have legal wills in place.
- Life insurance is also an essential consideration for unmarried couples, especially if you and your partner rely on each other financially. While you may think that you could never afford life insurance premiums on top of everything else, you may actually be surprised at how affordable life insurance can be.
HOW MUCH LIFE INSURANCE DOES A COUPLE NEED WITH NO KIDS AT HOME?
Take a moment and write down everything that would need to be paid for if you died tomorrow. Your list may include elements such as miscellaneous debts, your mortgage and car loans, as well as any credit card debt or student loans. Then add all the monthly bills, like utilities and groceries that your spouse would have to pay for on their own if you were gone.
It’s important to talk about this with your spouse, so both of you understand what would happen if one of you died unexpectedly. Everyone in a marriage should be aware of their joint and individual financial responsibilities because you never know when something catastrophic could happen.
WHEN A COUPLE GETS DIVORCED, WHAT HAPPENS TO THE LIFE INSURANCE POLICY?
What happens to the life insurance policy depends on the terms of the divorce agreement. However, a standard divorce agreement will typically exclude the ex-spouse as a beneficiary, unless otherwise stated.
When a couple gets divorced, they have to decide what to do with their life insurance policies. If they have joint policies, they can cancel them or keep them active. Usually, one spouse keeps the policy and pays the premiums.
If spouses are listed as beneficiaries on each other’s policies, they can choose to remain beneficiaries unless a court order stipulates otherwise. Also, if the couple has children, the parties may wish to alter their insurance policy to reflect them as beneficiaries.
WHEN SHOULD A MARRIED COUPLE STOP BUYING TERM LIFE INSURANCE?
As a rule of thumb, you should buy life insurance until you no longer have dependents who will suffer financially if you die.
If your adult children are financially independent and your spouse has enough money to pay for living expenses, you might not need life insurance anymore.
FAMILY LIFE INSURANCE
The best life insurance for young families includes term life insurance policies that provide adequate coverage. Term life insurance offers coverage for a fixed period such as 10, 20, or 30 years which pays out a death benefit if the policyholder dies during that time.
Term life policies tend to be more affordable than whole life policies that offer permanent coverage. The type of term life policy you choose will depend on your budget, as well as your family’s current and future needs.
WHAT LIFE INSURANCE POLICY BENEFIT INSURES AN ENTIRE FAMILY?
Each family life insurance policy comes with a set of rider options, or add-ons, that can be tacked on to the plan you’ve chosen. While riders may be an extra cost, they can provide additional coverage and benefits that will give you more peace of mind. Here are some of the most common riders and what they mean for you:
- A death benefit rider will provide a lump sum payment to the beneficiary upon the death of the breadwinner.
- A waiver of premium rider will waive the payment of a life insurance premium if the insured person becomes disabled and unable to work.
- An accidental death and dismemberment rider will provide a specified amount in case of death or loss of certain body parts such as hands, feet, eyes, and so on due to an accident.
- The disability income rider will provide a monthly income in case the insured person becomes totally disabled from an injury or illness and unable to work for a specified period of time.
Life insurance is a difficult subject. Many people don’t like to think about their own death, much less talk about it with family members. But life insurance is important, and it’s critical to talk to your loved ones about the best life insurance to ensure they protect themselves and their family members.
HOW TO TALK TO YOUR FAMILY ABOUT LIFE INSURANCE?
Discussing life insurance with your family members can be a delicate matter but talking about this topic is important. Use these tips to help you discuss life insurance with your loved ones.
TALK ABOUT THE BENEFITS OF LIFE INSURANCE
Life insurance comes in many different forms, but generally, all life policies offer coverage for death (as well as other events). The proceeds of a policy can pay for funeral expenses and can help replace lost income for beneficiaries after the insured’s death. If a family member is a primary breadwinner or caregiver, the loss of that person could be devastating to others in the family who depend on them financially or otherwise. Life insurance can help ease some of the financial burden in these situations.
EDUCATE YOURSELF BEFORE TALKING WITH YOUR FAMILY
Before talking with your family, it’s important that you educate yourself on different types of life insurance and how they work. You don’t need to become an expert, but you should have a solid understanding of life insurance and what it means to the family. You should be able to layout the benefits of life insurance to your family and how they outweigh the fears associated with imagining the worst.
WHAT IS COVERED IN TPD INSURANCE COVER?
The payout from your TPD insurance can be used for any purpose, including:
- Paying off debts.
- Funding for retraining or rehabilitation.
- Helping family members cope financially.
- A TPD payment can also provide a source of funds for investment, depending on the amount of cover you have and your individual circumstances.
Depending on the type of TPD cover you have and what you’re claiming for, you may need to be totally or partially unable to work for it to come into effect. Some policies will also require that you meet a minimum period of disablement before you can make a claim.
WHY CHOOSE AN INSURANCE SPECIALIST FOR TPD INSURANCE COVER?
Insurance specialists are often the best source of information when it comes to TPD insurance.
- An insurance specialist offers independent advice
- Insurance specialists work for you, not the insurance company. This means they can help you find the right TPD insurance policy for your needs and budget.
- They know the fine print when it comes to Total and Permanent Disability Insurance.
- A good insurance specialist explains what this type of cover means and how it affects your policy. They will also tell you exactly what the insurance policy covers and does not cover.
- They know who offers the best policies and life insurance premiums.
It’s not just about finding a cheap TPD Insurance quote, it’s also knowing which insurers offer the best benefits, claim services, and inclusions. A good insurance specialist knows which of these factors are important to you and finds the policy that fits your needs. And if you need to make a TPD claim, they can help with that process too.
INCOME PROTECTION INSURANCE
Get the best income protection insurance in Australia. Get peace of mind knowing that you can continue to pay your mortgage and meet other financial commitments if you are unable to work due to injury or illness.
Income protection insurance is designed to provide you with a regular income stream if you’re injured or become ill and cannot work. It replaces up to 75% of your income, so you can keep paying the bills when you’re unable to work.
Income protection insurance providers design it to offer far-reaching impacts. It can help you focus on rest and recovery without worrying about your financial situation, including debt repayments and other living expenses for you and your dependents.
Every income protection policy comes with a specific definition of partial or total disability, so it is highly recommended to check the relevant product disclosure statement before making a claim.
DO I NEED INCOME PROTECTION INSURANCE?
Before purchasing income protection insurance, you need to keep in mind several factors:
- You are self-employed, or you own a small business – in either case, you do not have sick or annual leave
- You have family members that rely upon your income
- Financial situation – debt such as mortgage requires regular payment even if you don’t work
- Also, deciding how much cover you need requires preparing a budget. This way, you will have a bigger picture of your monthly income and the expense you need to cover.
If you already have TPD or trauma insurance, these may cover the lost income, and private health insurance will cover medical costs. This is why, before purchasing income protection insurance, make sure you seek proper counselling..
Do not hesitate to contact Wealth Smart advisers.
WHAT DOES INCOME PROTECTION COVER?
Income protection insurance covers you against accidents and illnesses that prevent you from being able to do your job for a long period of time (usually more than six months). Your policy may also include additional benefits such as rehabilitation support, trauma insurance and death cover.
HOW DOES INCOME PROTECTION INSURANCE WORK?
The policy pays out a monthly benefit if you become ill or injured and are unable to work for an extended period of time.
You can nominate how long you would like the benefit period to last, but typically all policies have a maximum benefit period, which is usually around 65 years old. The longer the benefit period, the more expensive the policy is likely to be.
It’s important to note that you’ll need medical evidence in order for your claim to be successful. This means that if you’re able to return to work on a part-time basis (e.g., working three days per week), then you won’t receive any benefit from your insurer.
WHAT DOES INCOME PROTECTION INSURANCE COVER YOU FOR?
Income protection insurance typically covers up to 75% of your gross income, although the percentage can vary depending on the insurer and the terms of your policy. It also pays out until you return to work, retire, or die.
Your income is calculated based on your earnings immediately before you become ill or injured and can consider any bonuses or overtime payments. You may also be able to claim for a loss in bonus payments as a result of being unable to work.
Limits can apply, however. Some insurers only cover up to 80% of your earnings if you’re self-employed or earn more than around $200000 per year (although this depends on each individual policy).
SUPER FUND INCOME PROTECTION
Your superannuation fund may offer an income protection policy. This is an insurance policy, but it has some key differences to the personal income protection policies you can buy yourself.
Your insurance through a super fund is generally cheaper than buying your own policy because the premiums are spread across many people in the fund. Even though your share of the premiums is smaller, there are limits on how much you can claim.
Income protection through a super fund generally pays a maximum of 75 per cent of your income. With this in mind, it’s important to understand what kind of cover you will have before you make a claim so that you know whether it will be enough to get by if something happens.
WHAT IS SUPERANNUATION INCOME PROTECTION?
Superannuation income protection is an insurance policy designed to cover your income in the event you are unable to work as a result of injury or illness. It’s usually offered by your super fund, but in some cases it may be offered by an insurance company.
Superannuation income protection pays a lump sum or regular benefit payments if you’re injured or ill and can’t work for a prolonged period. This type of insurance is different from other types of insurance as it pays any benefits directly into your superannuation account. The Australian super fund income protection benefit is taxed at 15% (instead of your marginal tax rate) before being paid out to you or your beneficiary.
PERSONAL OR BUSINESS
Insurance providers of life insurance policies designed for couples, families, and employees often offer discounts for joint policies. What other features do you want to be included in a policy for couples or a group policy? Would you instead take SMSF (Self Managed Super Fund) life insurance?
There are several types of insurance that you can take out as part of your SMSF. You should take out insurance to cover your members and trustees. You should also consider insuring your assets, such as the building and contents of your premises.
Some types of insurance you can take out for your fund include:
- Life insurance
- TPD (total and permanent disability) insurance
- Trauma or critical illness insurance
- Income protection insurance
Your fund pays for certain types of insurance for you and other fund members. For example, where a member dies, the fund may receive a lump sum from the insurer to pay out death benefits to beneficiaries. The asset value of the SMSF is reduced by the amount paid to beneficiaries by the insurer.
WHAT IS SMSF INSURANCE?
SMSF (self-managed super fund) insurance is a simple and cost-effective group life insurance policy offering a series of life insurance options, allowing the members to benefit from tax advantages of structuring their life insurance through superannuation.
Another advantage of the SMSF life insurance is the fact that the fund pays the premiums, so members’ personal cash flow is not affected. Moreover, the SMSF insurance cover can be tailored to members’ unique circumstances.
SMSFs are allowed to offer any insurance as long as they meet one of the following superannuation conditions of release:
- A permanent disability that causes the fund member to cease work (TPD cover)
- Temporary incapacity that causes the fund member to temporarily stop work (income protection insurance)
Death (life insurance)
If you need help with deciding what life insurance to include in your group or couples policy, Wealth Smart life insurance specialists will assist you in making the right decision. Do not hesitate to contact us and get a quote.
SMSF INCOME PROTECTION
Self-Managed Super Funds (SMSFs) are set up by trustees for the sole purpose of providing retirement benefits to their members. SMSF trustees have a fiduciary duty to act in the best interest of their fund members and this includes ensuring that they have adequate insurance in place.
The trustees are legally responsible for decisions made on behalf of the fund and any failure to meet the legislative requirements can result in serious penalties. Income protection insurance is an essential part of any SMSF trustee’s risk management strategy because it can provide financial support in the event of sickness or injury.
With so many changes occurring within the superannuation industry, it’s important for SMSF trustees to understand how these changes affect them and how they can take advantage of new opportunities.
SMSF AND LIFE INSURANCE
As an SMSF trustee, you are in charge of your superannuation and its investments. You can use your fund to buy life insurance policies (cover) for members. When the cover is paid out, it is paid to the fund, not directly to you or your family. It is then used by the fund to pay any death benefits that are made when a member dies.
IS LIFE INSURANCE TAX DEDUCTIBLE IN SMSF?
Well, yes, the premiums may be deducted from the fund’s earnings in its annual tax return if the SMSF is listed as the policy owner and the member is an insured person.
IS INCOME PROTECTION INSURANCE TAX DEDUCTIBLE IN SMSF?
The short answer to this question is – yes, income protection insurance can be tax-deductible in an SMSF. The issue is not so much whether it is tax-deductible but more a matter of who pays the insurance premium.
Income protection insurance premiums are generally paid from an individual’s own after-tax income, so they are not a deduction for the individual. The premiums are also not a tax deduction for the SMSF trustee, as the trustee is an entity and does not earn an assessable income.
However, if you are using your superannuation fund to pay for your income protection premiums then it is possible to make these premium payments out of your superannuation fund in a tax-effective manner. This can be done by claiming the premiums as a deduction on your personal tax return through what is known as a limited recourse borrowing arrangement (LRBA).
CAN SMSF PAY FOR LIFE INSURANCE?
Yes, the SMSF can pay for life insurance, but only under certain circumstances.
The main rule is that if you want your SMSF to pay for life insurance, then the person covered by the policy must be a member of the fund. This means that it could potentially pay for insurance taken out on some or all of your members.
If the insured person is not a member of your fund, then any payment by the SMSF would be an in-house asset breach.
DO ALL SUPER FUNDS HAVE INCOME PROTECTION?
Yes, SMSFs can make life insurance payments for the benefit of members. However, there are some restrictions. Life insurance premiums paid by an SMSF must be made from a complying fund and not from a non-complying fund. An SMSF cannot pay for life insurance for its members if:
- The member has not satisfied a condition of release (e.g. retirement).
- The member is under the age of 65 and has not met one of the following conditions:
– they are totally or permanently disabled; or
– they are suffering from an illness or injury that stops them from being gainfully employed; or
– they have been gainfully employed in any capacity on a part-time, casual, or seasonal basis.
Superannuation is a government-mandated retirement savings program that covers all eligible employees, directors, and contractors. It is often referred to as a type of ‘pension’.
In Australia, superannuation is compulsory for most employees and is funded by employers. Employees also contribute to their own superannuation through a percentage of their income.
Superannuation does not replace other forms of retirement income, such as the age pension, but supplements your pension. It is not a savings account, but a long-term investment product designed to provide you with an income stream when you retire.
WHAT IS SUPERANNUATION INSURANCE?
Superannuation insurance — also known as superannuation death and total and permanent disability (TPD) insurance — is a form of insurance that pays out if you can’t work or die. It covers you for your superannuation balance, so the amount you receive will depend on how much super you have.
Superannuation insurance is different from life insurance in the way it pays out.
If you have life insurance, your beneficiary will receive a sum of money when you die. The sum will typically be enough to cover any outstanding debt (e.g. a home loan) and provide for your dependents. If you’re married, your partner will probably receive the payout. If you’re single, it may go to your children or parents (or whoever else you nominate).
Superannuation insurance works differently because it usually pays directly into your super account rather than to a beneficiary. You may be able to choose whether the payout goes into an existing fund, or you can set up a new one if you don’t already have one. The benefit is then available as part of your retirement savings, so you won’t need to pay tax on it when it’s released at retirement age.
WHAT INSURANCES CAN YOU INCLUDE IN YOUR SUPERANNUATION ACCOUNT?
There are three main types of insurance policies that can be included in your superannuation account.
The first is life insurance. This policy pays out a lump sum to your beneficiaries if you pass away while under the age of retirement. It’s intended to help cover any debts you may have, as well as provide a financial buffer for your loved ones during a difficult time.
The second is total and permanent disability (TPD) insurance. This is a life-changing policy that provides financial support if you’re left unable to work due to an injury or illness. The payout from this policy can be used to pay for rehabilitation costs, as well as helping to replace your lost income once you’re no longer able to work.
Lastly, income protection insurance covers your lost income if you become ill or injured and therefore unable to work. It pays out a monthly benefit until you’re able to return to work.
DOES SUPERANNUATION COVER LIFE INSURANCE?
Life insurance is an important part of any comprehensive financial plan, and superannuation often plays a role in this. In fact, many Australians have cover through their superannuation fund.
It’s important to understand the insurances you have through your super fund – how they work, how much cover you have, and the costs involved. Most importantly, you need to know if you have enough cover to protect yourself and your family.
EMPLOYER SOLUTIONS-SELF EMPLOYED SUPERANNUATION
When you’re self-employed, you need to put money aside for your retirement by contributing to a super fund, just as you would if you were an employee.
Making regular contributions means that when the time comes to retire, your super will be there waiting for you – giving a much-needed boost to your finances at that time.
Self-employed superannuation is a system that has been put in place by the Australian Government so that people who are self-employed can put money aside for their retirement. It works in a similar way to other superannuation systems, but the difference is that it does not require an employer to contribute.
CASUAL EMPLOYMENT SUPERANNUATION AUSTRALIA
Casual employees are generally entitled to superannuation guarantee (SG) contributions.
However, if the casual employee is under 18 years of age and works on a part-time basis (less than 30 hours per week), they may not be entitled to SG unless their ordinary time earnings from some or all of their employment exceed $450 per month. Employers are required to pay at least 9.5 % to the super for casual staff.
Some employees may receive a higher rate of pay due to an allowance for paid leave. These employees are likely to be entitled to paid leave and thus not casual employees, even though they may be described as such in an award or registered agreement. For example, shift workers employed on a regular and systematic basis (e.g., five 12-hour shifts per week) who receive an ‘allowance’ for paid leave entitlements are likely to be permanent shift workers rather than casuals.
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