When an individual buys life insurance through their superannuation fund it is cheaper and more tax effective than purchasing it in their own name.
With many changes in super, it has certainly come a lot more popular for consumers to purchase their life insurance through their super fund.
Here at Rate Detective we have taken the time out to look at the benefits and disadvantages of doing so.
Benefits
The major benefits we see here for taking life cover under your superannuation are:
- Its is cheaper due to the fact the fund is able to buy in bulk discount.
- The most basic life covers in most cases does not require a medical check up by the consumer.
- Through taking insurance through your super it is tax-effective since the premiums are paid for out of contributions made by your employer or from your own personal contributions that generate either a direct tax deduction (for the self-employed) or are paid from pre-tax income, in the case of salary sacrifice contributions.
Disadvantages
The major disadvantages are:
- A lot of the funds do not provide the necessary cover the individual actually requires.
- In many cases there can be substantial delays in life insurance benefits being paid since these initially go to the fund, which then allocates them to the beneficiaries, which can be a very much drawn out affair.
- Unless you have the option of making a binding beneficiary nomination, you can't be certain your life insurance payout will go to the people you want it to.
- Benefits are subject to more rules limiting who can receive a payout tax free.
Rate Detective recommendation
We highly recommend when deciding what life insurance is best for your personal needs, that you speak to a licensed financial planner. If you don't have one, we can organise a free no obligation financial review and help find a financial advisor in your area who can suit your needs. Just contact us.
