Insurance in Super
Did you know you can get insurance in super? Yes it's true, in Australia you can often buy life insurance through your superannuation fund. Most Australian superannuation funds will offer some type of insurance, with breadth of coverage, premium costs and types of policies offered varying between all funds.
Holding your insurance in superannuation does have its benefits, however you should weigh up your options of holding your policy outside of super too as there are pro's and cons for either option.
Benefits of life insurance through super
People may choose to fund their insurance in super for a number of reasons:
- Tax effective - premiums are paid with pre-tax dollars
- Increases personal cash flow - premiums are funded inside super
- Easy to manage - premiums are automatically deducted from your fund
- No medical examinations - for some funds. These funds have automatic acceptance, however any pre-existing conditions are typically excluded.
- Death benefits are tax generally free - if paid to your dependents
Types of insurance available in superannuation
Australian superannuation funds typically offer 3 main types of insurance in super, these include:
- Life Insurance
- TPD Insurance
- Salary Continuance Insurance
Important considerations before deciding
Before you decide to buy insurance in super you should be aware of the following:
- Limited default cover - the default sum insured offered by your super fund may not be enough. If you need more coverage ask your fund if you can increase your cover. If this is not possible then you can buy cover outside of super, or use another external policy to 'top up' your sum insured.
- Limited breadth of coverage - the policy offered by your fund may not be as comprehensive as policies available outside of super. For this scenario you may like to buy cover outside of super.
- Cover may end if you change funds - before closing or consolidating your funds check the type and level cover offered by your new fund first.
- Tax implications on life insurance proceeds - this may apply if your beneficiary is not a dependant.
- Exclusions on pre-existing conditions - if you would like to cover a pre-existing condition you should consider getting cover outside super.
- Estate Planning - your super and insurance benefits often make up a large part of your estate, so it is worthwhile having adequate estate plans in place. This is because your proceeds can be contested and overturned by your super fund. If this is a concern seek advice from an xLfie adviser.
- Premiums costs outside vs inside super - Check how much your insurance premiums cost inside your super fund. If your premiums are high they may erode your superannuation savings much faster.
Getting advice on insurance in superannuation
Funding your insurance through superannuation can be a tricky topic with such a huge variety of funds and policies available. Whether you have a SMSF, retail, corporate or industry super fund, our superannuation advisers can conduct superannuation comparisons help you weigh-up the insurance options best suited to your needs.
