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Insurance Through Your Superannuation

We think it’s important to stay informed and be protected in the best way that suits you. An alternative to purchasing Life Insurance through a retail Life Insurance provider is to buy it through your superannuation fund. Whether you have an industry super fund or a self-managed super fund, choosing a Life Insurance policy through your super offers a number of benefits and disadvantages.

It’s important to know as much as you can about Life Insurance through your super before you commit. Click below to find out more about each topic.

 

Types of insurance available through your super

Life Cover

As with a stand-alone policy, the most popular insurance cover available through your superannuation fund is Life Cover (also known as Death Cover). This provides a lump sum payment to your beneficiaries in the event of your death.

Income Protection

You can also receive Income Protection through your super fund. Income Protection provides ongoing monthly payments until you recover from a serious illness or injury (or until you reach the maximum benefit period stipulated in your policy). This payment is typically 75% of your regular income.

TPD Insurance

Total and Permanent Disability insurance is the final cover typically offered through your super. This type of insurance provides you 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 cover).
 

Insurance through your superannuation fund

Choosing your Life Insurance and Income Protection policies are often big decisions to make – but you may find you’re covered to some extent through your superannuation.

Industry super funds typically offer a minimum cover of Life Insurance with their policies. There are clear advantages to being insured through your super fund – cover at wholesale costs is definitely attractive. But are you sure you’re getting the best protection for your situation? Click on the links below to find out more about:

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 your 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 joint policy discounts and tax benefits associated with SMSFs, there are a number of benefits that come with connecting Life Insurance and Income Protection to your SMSF. Click on the links below to find out more about:

 

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 Life Insurance is bought in bulk it may be cheaper, which helps for 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 alone.

Another advantage is that if your insurance policy is a Group policy, you may not need to undergo individual medical checks. Of course this depends on your super fund and the insurance cover you have.

Finally, your premium payments are generally tax deductible, since they come from any contributions to your super fund.
 

Disadvantages of insurance through superannuation

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

To begin with, you may have a generic policy with 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 circumstances you can pursue a more comprehensive policy.

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 benefit, which may not be who you intended.

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

For further comparisons of a super fund Life Insurance policy with a stand-along policy, read here.

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 on your savings accounts If you don’t nominate a beneficiary, your super fund decides who receives your benefit
It’s easy to manage with premiums automatically deducted from your super fund Premiums deducted monthly or annually can eroding your retirement savings
You may not need a health check There can be delays in the payout of your benefits

Getting the right policy for your needs

At Wealth Smart, we believe it’s important you consider your Life Insurance policy carefully to make sure you have the protection you want and need. If you’re unsure whether a super fund Life Insurance policy is suitable for your circumstances, contact one of our Wealth Smart advisors today.

Page last updated: February 20, 2015