Many super funds arrange life and disability cover for their members. Insurance is arranged by the super fund trustee, acting on behalf of the members of the fund. Having insurance for accidents and illness can provide a sense of security for you and your family.
Deciding whether to have your insurance within superannuation or outside super can be a complex decision and should be discussed with your financial adviser.
Three insurances can be written within superannuation – Life, TPD “any” occupation, and Income Protection. TPD “own” occupation and Trauma insurance are not permitted within superannuation.
Considerations for insurance through super
The biggest appeal for writing insurance through super is that premiums are paid with pre-tax dollars, so essentially they are cheaper. Another benefit is that there is automatic acceptance up to certain amounts, with no need for a medical history check.
However, there are some downsides to insurance through super that it is important to be aware of:
- You may not be able to access the benefits until retirement (payments are treated as superannuation moneys)
- Death benefits may be taxed, depending on to whom the benefit is paid
- There can be significant taxation of TPD benefits
- You cannot insure for TPD “own” occupation
- The cover is not portable if you change or consolidate funds
The alternative is insurance outside of super. While this is generally a more expensive option, the biggest benefit to having insurance outside super is portability.
If you have insurance inside super and you change employers and funds, you will have to apply for new insurance. A new insurer may look at your health history and cover may be declined or offered at higher premiums. Insurance outside super will mean you can be insured no matter where you work.
While there is not a one size fits all solution, your financial adviser can work with you to identify the most appropriate insurance option for your circumstances.
Why not schedule a meeting with Chaston Financial Solutions now?
Information current as at 11 June 2015
This information is of a general nature only and has been prepared without taking into account your particular financial needs, circumstances and objectives. While every effort has been made to ensure the accuracy of the information, it is not guaranteed. You should obtain professional advice before acting on the information contained in this publication. You should read the Product Disclosure Statement (PDS) before making a decision about a product.Mark Chaston is an Authorised Representative (No. 263236) and Chaston Financial Solutions Pty Ltd ABN 55 124 139 430 is a Corporate Authorised Representative (No 1244249) of ClearView Financial Advice Pty Limited ABN 89 133 593 012 AFS Licence No. 331367 GPO Box 4232, Sydney NSW 2001