SMSF Insurance
An SMSF insurance policy can double up as a life insurance policy if you opt for it while signing up. Life Insurance is a product that could be life-saving when an unforeseen situation arises. In addition, most Australians are covered via a superannuation fund, and there's no reason why an SMSF trustee should be without a policy. But, of course, a cookie-cutter approach won't always cut it, and there are many areas we'll help you consider, so you'll ultimately choose what's best for you.
SMSF Insurance

SMSF Insurance

WHAT IS SMSF INSURANCE?

SMSF stands for ‘self-managed super fund’. This type of insurance is a group life insurance policy that is simple and cost-effective. Moreover, SMSF policyholders benefit from tax advantages as they can structure their life insurance through superannuation.

SMSF insurance premiums are different from regular insurance premiums as they are tax-deductible. SMSF insurance premiums can be deducted from the super fund’s earnings in the annual tax return if the SMSF is listed as the policy owner. Your WealthSmart insurance advisor can customise this product to fit the policyholder’s expectations. SMSF insurance also ensures that the policyholder’s cash flow is not affected.

Insurance companies also pay out lump sums via the SMSF only when the policyholder experiences permanent disability and can no longer work. Other conditions under which the insurance company will pay include the policyholder’s temporary incapacity, which results in their inability to work for a period, and death.

At WealthSmart, we offer a range of services and expertise from our advisors, which you can use to choose the SMSF insurance products that suit you. We urge you to contact us with any queries or questions that one of our advisors will be able to answer. Get in touch with us by calling 1800 765 100.

INSURANCE THROUGH YOUR SELF MANAGED SUPER FUND

LIFE INSURANCE

When you take out the SMSF insurance policy, talk to your broker to help ensure that it works as SMSF insurance and life insurance. Life Insurance is a product that could be life-saving when an unforeseen situation arises. Yet, surprisingly, only 13% of SMSF members have some kind of Life Insurance cover. This figure, which the Federal Government has estimated, is worrying.

Most Australians are covered via a superannuation fund, so there’s no reason why an SMSF trustee should be without a policy. SMSF trustees have the duty of care to consider Life Insurance for their members. However, a cookie-cutter approach won’t always cut it, and there are many areas we’ll help you think about, so you’ll ultimately choose what’s best for you.

A flexible approach toward life insurance is a defining feature of a self-managed super fund. Combining SMSF and insurance increases a person’s life cover. Besides, the SMSF trustee can opt for other funds like TPD. Life Insurance and Total and Permanent Disability (TPD) insurance for SMSF is not mandatory – but having insurance in SMSFs provides several tax benefits. Therefore, it is an option we recommend selecting. With our guidance, you’ll be able to figure out what you need to consider.

Purchasing Life Insurance through your SMSF is not the same as buying Life Insurance as an individual. Your SMSF functions as a mediator between your insurance provider and SMSF members and beneficiaries. You may encounter insurance providers who do not allow multiple insurance policies within the SMSF and outside of it. Before finalising anything, you should talk to your broker to understand how the SMSF and life insurance will function and benefit you.

Purchasing Life Insurance through your SMSF can also offer a tax advantage seeing that super fund premiums are tax-deductible. However, this comes with conditions, as super fund premiums are only tax-deductible if you are self-employed or less than 10% of your income comes from an employee position. The tax benefits apply to term Life Cover, TPD & Income Protection.

If you experience the unfortunate event of being totally and permanently disabled and unable to work again, you will be able to benefit from Total and Permanent Disability insurance (TPD). This insurance product offers a lump sum payment that you can use to cover the costs of rehabilitation, the repayment of debts, and the cost of living. Unfortunately, any Occupation TPD is only available through your superannuation which means that people with an ‘own occupation’ definition may not be able to get a disability cover.

At WealthSmart, we offer a range of services and expertise from our advisors, which you can use to choose the SMSF insurance products that suit you. We urge you to contact us with any queries or questions that one of our advisors will be able to answer. Get in touch with us by calling 1800 765 100.

Find out more about Life Insurance through your SMSF.

INCOME PROTECTION

Income Protection is one insurance product that provides cover if you become injured or seriously ill and cannot work. Income Protection offers you and your loved ones up to 75% of your regular income for the period that you cannot work. This cover will be a much-needed source of income because you are likely to have added financial pressures, such as medical expenses, in a situation like this. So, whether you use the money for school fees, mortgage, or groceries, income protection from your SMSF would be a lifesaver.

Often overlooked, Income Protection can become a vital addition to a policy – primarily when self-employed. While the self-employed popularly run an SMSF to invest in property, this is all the more reason to invest in Income Protection. The risks involved in your investment strategy mean income protection could be a vital lifesaver should anything unforeseen happen to you.

Purchasing Income Protection through your SMSF also has added benefits. These benefits are tax-deductible premiums and not out-of-pocket costs to pay the premiums. This advantage means that you can claim tax relief. If your tax rate is higher than your SMSF’s tax rate, you will be able to claim even higher deductions.

Purchasing Income Protection through your SMSF also has its disadvantages. Income Protection is included in the concessional contribution cap when buying insurance through your SMSF, which amounts to roughly $25,000 a year. If you exceed this cap, you may face significant consequences. An additional disadvantage of buying Income Protection through your SMSF is that the payments made after a successful claim do not always payout immediately.

The responsible companies assure fund members of a steady income if you are rendered incapable of working. This form of insurance will offer regular payments across an agreed time of injury, usually only two years, but it can offer these payments until you turn 60. The period depends on the level of Income Protection you choose.

Income Protection is different from worker’s compensation as workers’ compensation only provides benefits if you sustain an injury at work during workplace activity. This condition means that you will not be able to claim the worker’s compensation if you sustain an injury outside of the workplace or fall ill, unlike Income Protection. The benefits of worker’s compensation are also governed and dependent on several restrictions which might not cover all of your expenses. This requirement is why taking out Income Protection is a wise choice.

Choosing the right insurance provider for you will give you more of the advantageous features of Income Protection in SMSF. Furthermore, income Protection is customisable, so you can select the waiting period and the timeframe of available benefits.

At WealthSmart, we offer a range of services and expertise from our advisors, which you can use to choose the SMSF insurance products that suit you. We urge you to contact us with any queries or questions that one of our advisors will be able to answer. Get in touch with us by calling 1800 765 100.

Find out why and what you should consider in Income Protection.

RETIREMENT SAVINGS

The top providers of SMSF superannuation services enable clients to have high levels of control over their retirement funds. Your hard-earned money is managed by insurers so that you can retire peacefully. Before you ask for quotes from insurers, check the services they offer – administrative, technical, and financial.

If you are overwhelmed by the rules that govern self-managed superannuation funds or SMSF, it’s time to connect with professional insurance advisors. We help you identify your insurance needs and narrow down your insurance choices as your trusted insurance support. Finally, with WealthSmart at the helm, you enjoy complete trust and liberty to choose the SMSF and superannuation insurance that works for you.

At WealthSmart, we offer a range of services and expertise from our advisors, which you can use to choose the SMSF insurance products that suit you. We urge you to contact us with any queries or questions that one of our advisors will be able to answer. Get in touch with us by calling 1800 765 100.


FAQs

CAN SMSF PAY FOR HEALTH INSURANCE?

No.

CAN SMSF PAY FOR LIFE INSURANCE?

Yes. SMSF’s fund Life, TPD, and Income protection cover. These levels of payment cover occur in the same way as regular retail super funds pay for super. In addition, you can arrange that your SMSF is the policyholder, which means that the company will also pay a claim to your SMSF. The payment for your premiums will come from your SMSF bank account.

WHAT INSURANCES CAN YOU INCLUDE IN YOUR SUPERANNUATION ACCOUNT?

Life, TPD, and Income Protection. Trauma is not able to be funded through super.

DO SUPER FUNDS AUTOMATICALLY COME WITH INCOME PROTECTION?

No. Thinking that a super fund automatically accompanies income protection is a common misconception. Note that automatically added policies within a super fund can be limited. To ensure that your policy covers your needs and wants, you need to ensure that you choose and set the terms of the policy.

IN SMSF, IS INCOME PROTECTION TAX DEDUCTIBLE?

Generally, within a super fund, there is a 15% rebate for a premium paid. If the company pays your Income Protection Policies outside of the super environment, they will be tax-deductible at the marginal tax rate. We recommend that you examine your account for any tax related and SMSF queries.

IS IT BETTER TO GET LIFE INSURANCE THROUGH SUPER?

There are definitely pros and cons to funding super both ways. Obviously, cash flow is one consideration, but also the long-term effect on your super balance is an important consideration. So we would strongly suggest giving us a call if you have any questions in this area.