Insurance in super

Personal insurance cover is often available from your super fund which can be beneficial for a number of reasons.

• Cashflow - Premiums are deducted from your super balance, so the cost doesn’t affect your day-to-day cash flow. 
• Tax-effective - Premiums can be paid with pre-tax dollars (eg with your salary sacrificed super contributions). 
• Automatic acceptance - Some insurers offer automatic acceptance through your super fund, ie you may not have to undergo a medical examination to gain cover up to a certain level. 
• Lower cost - Insurance is often at group rates, so your premiums may be at a lower cost than if held outside of super.

Things to consider

While holding insurance within super can be beneficial, there are some other things you should consider. You may wish to discuss these with your financial adviser.

Will your super savings be impacted?
If you are not making regular tax-effective contributions into your super fund, will the cost of insurance premiums erode your super over time? 

What about your tax position?
Your decision to hold insurance inside or outside of super may depend on your tax position. As the super environment is tax-effective, you may be able to put strategies in place that will help pay insurance premiums and improve your overall tax position. However, the cost of Income Protection cover held outside of super is tax-deductible. It may be worthwhile speaking to a financial adviser about what the best strategy is for your own situation. 

How will any insurance benefits be paid?
If you make a successful insurance claim through a policy held through your super fund, the insurer will pay your benefits to the super fund’s trustee. As super funds have different rules and restrictions, it’s worthwhile checking with your fund as to how any insurance benefits would be paid to you or your beneficiaries from the trustee. Different policies may also have different restrictions.

Who will receive your life insurance benefits and inherit your super?
Under superannuation law, if you die, your super balance and any life insurance benefits can generally be paid to your estate or certain individuals only, such as a spouse or someone who is financially dependent on you. You must nominate this person through your super fund provider. As your super benefits could be worth a significant part of your estate, it’s worth reviewing your nomination every three years to ensure it’s still up to date.

Do you have a DIY super fund?
Holding insurance though your DIY super fund is possible and can play a key role in your estate planning arrangements. Due to the complex regulations surrounding DIY funds, professional advice may help here.

Can financial advice help?
A financial adviser can review your overal financial situation, commitments and lifestyle to help you decide on an adequate level of insurance cover. They can also advise you on whether to hold insurance inside super, outside super or to hold a combination of both.

What’s next?

• Speak to your financial adviser.
• Contact Perpetual Private Clients to speak to one of our financial advisers.
• Review our super plans which have optional insurance cover available.

Perpetual or Perpetual Group means Perpetual Limited, ABN 86 000 431 827, and its subsidiaries. Perpetual Private Clients advice and services are provided by Perpetual Trustee Company Limited (PTCo), ABN 42 000 001 007, AFSL 236643. This information has been prepared by Perpetual and contains information contributed by third parties. It contains general information and is not intended to provide you with advice or take into account your objectives, financial situation or needs. You should consider whether the information is suitable for your circumstances and we recommend that you seek professional financial, tax and/or legal advice. The information is believed to be accurate at the time of compilation and is provided by Perpetual in good faith. However, the statements including assumptions and conclusions are not intended to be a comprehensive statement of relevant practice or law that is often complex and can change. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information.