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Insurance? – Looking at inside vs outside Superannution Policies

Do you know whether or not you hold Insurance policies inside of your Superannuation account?

Most clients we come across don’t and are surprised to learn that they have some Life & Salary Continuance cover paid for by their Superannuation balance.

There are many considerations that need to be taken in to account when structuring Insurance policies. A short list is included below:

Tax:

  • Insurance premiums can be deductible to your Super account.
  • Depending on the recipient of your Superannuation proceeds (at death), life insurance benefits could end up being taxed.
  • Income Protection is deductible to a personal entity and as such usually provides a greater tax benefit being held outside of Super (depending on your marginal rate of tax).

Policy Features:

  • We can usually tailor more attractive policies for clients outside of Super.  This is because there are a range of rules which limit what types of policies can be held inside of Super.  An example is Trauma insurance which covers some of the major health risks (Heart Attack, Cancer, Stroke).  In the event of a claim, the benefit would very likely be trapped inside of Super until a condition of release is met (which could take many years).

Claims.  We provide clients with a very supportive Claims service to limit the stress involved (during what is already a difficult time).  We have close working relationships with the Insurers and their underwriters, which usually leads to better outcomes for clients.

Cash flows/affordability:

  • For clients who can’t afford the level of required cover, an attractive option is to hold the policies through Super.
  •  Some Super providers offer ‘group’ insurance.  This can be cheaper than retail insurance however can provide major issues at claim time if any health issues weren’t disclosed.  Many of the major providers have also substantially increased these premiums in recent times.

 

There are many factors to consider when writing an Insurance Policy.  You may already have some cover inside of Super, but this will only be a default amount and would not be likely to meet your personal needs in the event of a claim.  If you are paying for a product (in this case Insurance), then it is very important you understand what you are paying for and how/when you can benefit.

 
This article has been provided by Benchmark Financial Services.  For an obligation free review of your policies, feel free to contact David Silver of Benchmark Financial Services or on 03 9576 2399.

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