What is insurance through superannuation?

Insurance through superannuation involves paying life insurance, and other types of insurance, via your superannuation fund. It can be a cost-effective way of protecting yourself and your loved ones; however, there are some limitations of this cover. 

Life insurance can give you peace of mind that what you’ve created in life is financially protected. When something goes wrong, life insurance can help you and your family both maintain your obligations and achieve your dreams. 

What are the benefits of superannuation insurance? 

Superannuation insurance means paying life insurance from super. This gives you a number of financial benefits: 

• Pay your premiums before tax – Your employer’s contributions to your super fund are paid before tax, which means that paying life insurance from super can be tax effective 
• Preserve disposable income – Superannuation insurance premiums are paid directly from your super balance, without affecting your day-to-day cash flow. 
• Enjoy tax concessions – If eligible, you may be able to claim a tax deduction on your super contributions, to fund your insurance premiums. 
• Automatic acceptance – Most funds offer some level of automatic cover, which means you avoid the time and hassle involved with a lengthy, complex underwriting process. 

What are some of the limitations and other considerations to keep in mind when looking at superannuation insurance? 

Paying life insurance from super allows you to access three important types of insurance cover: Income Protection, Total and Permanent Disability (TPD) and Life Insurance. However, there are some additional considerations to keep in mind: 

• The type and level of cover available through super can be limited – I can help you assess the options and determine the right cover for you and your family, to ensure you’re protected when you need it the most. 
• Make sure to keep track of your insurance policies through super – If you have more than one super fund, you may pay for more than one policy. 
• Not all benefits are tax-free – Tax may be payable on some superannuation insurance payouts, depending on who receives the pay out and when it takes place. This is often the case if your beneficiary is not a dependent.  
• There can be delays in superannuation insurance payouts – Insurers pay the benefit to the trustee of your fund, who then distributes it to you or your beneficiaries. 

• Consider your beneficiaries – If you do not make a binding beneficiary nomination, or your fund does not offer binding nominations, the trustee of your super fund decides who receives your superannuation insurance payout on your death. Usually, superannuation insurance payouts are paid to dependants, after your wishes have been taken into consideration. 

If you are reviewing your finances and superannuation insurances, I can help you understand all the pros and cons of superannuation insurance, keep you updated on important superannuation insurance changes and work with you to build the best solution for you. Please get in touch if you have any questions. 

Source: TAL