How to Structure Insurance through a Self-Managed Super Fund

How to Structure Insurance through a Self-Managed Super Fund

Are you a trustee or considering becoming a trustee of a self-managed fund?

Well if you are you may find the next couple of minutes very interesting.

Trustees of SMSF’s usually have their eyes firmly on the prize of retirement savings, contributions and making sure they are aware of all the relevant tax savings available. Not many give full consideration to incorporating insurance into the fund and the benefits that can be gained.

Interestingly as part of government requirements SMSF trustees are now obligated to consider life insurance and TPD (Total and Permanent Disability insurance) as part of their overall investment approach. Trustees are not obligated to take out insurance policies, but they must show evidence that they have considered it as an option.

So, in thinking about insurance within a SMSF let’s look at some of the potential advantages.

  • You can make premium payments through funds paid, or paid already, into the fund.
  • Trustees can tailor the insurance to meet their specific needs
  • Because premium payments are made from the fund, it takes the pressure of other everyday living expenses
  • There is a net cost saving on premiums

Potential pitfalls to be aware of:

  • You need to know the ins and outs of claiming tax deductions within your SMSF as they can be a significant cost upon payout of a benefit.
  • Any insurance payout made becomes part of a members balance, and as with all of funds held inside the fund conditions of release need to be satisfied before any such finds can be made available to a member.
  • If you roll money over from another retail or industry fund into your SMSF any insurance held in the old fund may stop at that point. You should leave some funds in the previous account to cover the annual premium, or establish new cover in SMSF.
  • Insurance policies need to be owned and paid for by the trustees and not the insured member.

So as you can see although there are potentially many savings and advantages to be found by structuring insurance through a self-managed super fund, there are also a number of elements that need to be thought through thoroughly before taking the plunge.

With potential significant tax savings to be made, understandably government regulations around this type of structure are fairly stringent and must be adhered to.

At Rate Detective we have experienced consultants well versed in all aspects of this procedure. We can assist you with all your insurance needs within a SMSF be it life insurance, trauma cover, total and permanent disability, or income protection.

In addition to guiding you through the regulations and procedures they will also be able to help you select the most competitive insurance company for your needs, and tailor your insurance requirements to your particular situation.

Don’t hesitate to contact us today and well help you get the ball rolling with ease.

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Published on July 7-th, 2014 in Insurance
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.
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