Benefits of Life Insurance as Part of Your Self-Managed Super Fund
July 26, 2022

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The Advantages of Life Insurance in Your SMSF

Managing your super through a Self-Managed Superannuation Fund (SMSF) has become an increasingly popular option these days, particularly because of its potential to yield greater returns. But what are the pros of connection your Life Insurance policy to your SMSF?

Self-employed people in particular stand to benefit from combining their SMSF with a Life Insurance policy. If you’re considering this option, you’ll need to understand the benefits and pitfalls of various Life Insurance policies and consider the possibility of getting your own.

Here are some things to be aware of before you make any major decisions concerning your SMSF so you can benefit as much as possible from including Life Insurance in your SMSF investment strategy.

SMSFs are becoming increasingly popular

If you haven’t yet made the decision to manage your own super, whether out of scepticism, fear of risk, or lack of information, you should know that SMSFs are becoming an increasingly popular choice. In fact, they are now one of Australia’s most rapidly growing super segments.

The asset amounts held in SMSFs have seen overwhelming growth in the last decade alone. The tax benefits and the flexibility to make your own investment decisions mean you too might be seriously considering starting an SMSF.

SMSF trustees do not have to get insurance cover

It’s common knowledge that you can hold insurance using your superannuation, but some people still choose not to. It’s a mistake to dismiss Life Insurance right off the bat.

When you decide to use an SMSF, you should reconsider purchasing insurance as there are numerous benefits offered by Life Insurance policies that people without SMSFs don’t get to enjoy. In spite of the above, it is currently not compulsory for SMSF trustees to have insurance, though they are required to consider it.

New obligations for SMSF trustees

The government recently introduced new obligations for SMSF trustees. SMSF trustees are now required to regularly consider the insurance requirements of its members through the SMSF’s investment strategy. While trustees may choose not to include any Life Insurance policies on the grounds of their investment strategy, they are required by law to regularly review this decision and their investment strategy.

Considering insurance as part of your investment strategy

As you can see, SMSF trustees must regularly reassess the suitability of insurance as an investment strategy. You must provide reasons if you decide that no insurance policies are to be purchased in accordance with the strategy. You should seek professional help from an insurance adviser if you’re unclear of the specifics of Life Insurance policies and the role they can play in an investment strategy.

Not all Life Insurance policies are suitable in combination with an SMSF

To complicate matters further, some Life Insurance policies are more suitable than others for inclusion in an SMSF’s investment strategy. Before you make a decision you need a firm understanding of the types of tax benefits an insurance policy can offer and of the way an SMSF can ensure insurance premiums get paid.

Unless you’re confident this is something you can handle on your own, it’s best to consult a professional insurance adviser. Your adviser will be able to explain which Life Insurance policies are suitable for SMSFs, as well as the impact such a Life Insurance policy can have on your SMSF.

If you are thinking of getting a Life Insurance policy as part of your SMSF investment strategy, it is crucial you obtain professional advice from a qualified adviser.

Many people are unable to fully enjoy the benefits of life insurance through SMSF due to misinformation, so it’s important you find out all you can, not only from the internet but also from experts in the insurance field. Contact us today for an obligation-free chat.

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