A tax-effective way to buy insurance

Taking insurance through your superannuation can be a simpler and smarter way to protect your family.

At a glance

  • Insurance taken through super and paid from pre-tax contributions may be more tax-effective.
  • Employer default super plans generally have a basic level of insurance.
  • Increasing cover may involve taking a medical examination. And/or provide financial information.

Generally, super can be a tax-effective way to take more insurance because you can pay for cover out of pre-tax contributions to super instead of paying it from your take-home pay. This makes insuring through super a potentially cheaper way to make sure you're covered.

There are other points to think about when considering insuring through super and SMSFs:

  • Temporary salary continuance (also called income protection), total and permanent disablement and death cover are available with most retail and corporate super funds.
  • If you are making super contributions through your employer's default super fund, it is likely your employer will have automatically negotiated some cover for you.
  • The amount of automatic cover and the cost of this cover will vary between super funds.
  • This automatic level of cover in your employer fund is not tailored to your situation, and it may not be enough.
  • You need to clarify the conditions under which temporary and permanent disablement is paid from your plan, and whether this suits your employment.
  • You can apply to increase or add cover, although you may need to undergo a medical examination and/or provide more financial information.
  • Trauma insurance cover is generally not available through super or an SMSF
  • The benefits paid to you or your dependants may be subject to tax when claiming under TPD or following your death.
  • You will have to nominate who you would like to receive your benefits following your death. Simply updating your will is not enough.

Making sure you have the right type of plan, amount of cover and that your death benefit will be paid to your chosen beneficiaries are all important considerations for your insurance, whichever way you choose to insure.

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