INSURANCE IN SUPERANNUATION

Taking out insurance through super can be a tax-effective way of securing your financial future, both for you and your family.

INSURANCE OVERVIEW

Insurance cover can provide security and protection for your family in the event that you are temporarily or permanently unable to work. With many Australians relying on regular income to cover the cost of day to day expenses,mortgage repayments and personal loan or credit card debt without insurance there would be an additional burden on the family, which could otherwise be prevented.

• Life Insurance (also known as death cover) pays an agreed lump sum to your dependants if you die, or are diagnosed with a terminal illness and have less than 12 months to live.

• Total and Permanent Disablement Insurance (TPD) pays you a lump sum if you become totally and permanently disabled and are no longer able to work.

• Income Protection Insurance (also called salary continuance) pays you a portion of your salary each month if you are disabled due to injury or illness and unable to work.

We recommend you discuss with your financial adviser the appropriate amount of cover for your needs, your adviser can determine the correct amount of cover considering your personal situation.

WHAT ARE THE BENEFITS?

• Value for money. Insurance offered within many super funds is based on group rates and standard benefits, so it may be more cost effective than taking out the same cover outside super.

• Tax-effective. Generally super contributions (including those to pay for your insurance premiums) are taxed at 15%1 , which is deducted from the super fund, rather than at your marginal rate, making it more taxeffective than if held outside super.

• Better cash flow. As the premiums are deducted directly from your super balance, your net cash income is not affected by paying insurance premiums.

• Ease of payment. You don’t need to make any payments as the premiums are automatically deducted from your super balance each month.

• Better cover for less. As insurance premiums in super are tax-deductible to the super fund, Perpetual will apply a 15% contribution tax credit to your premium. This gives you the option to either receive the same cover for less, or increase the cover for the same cost, compared to buying insurance outside super.

WHO IS COVER SUITABLE FOR?

Insurance through your super fund may be worth considering if you:

• are on a high marginal tax rate, given the tax-effectiveness of using your pre-tax salary to pay premiums

• don’t have sufficient cash flow outside of super to pay for premiums.

• are seeking the best cover at a reduced price, given that group rates available may be cheaper than similar policies held outside super.

• are wanting to secure the financial future of your family by providing a lump sum in the event of your death or being unable to work.

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1. Individuals will have to pay an extra 15% tax on some of, or all of their ‘taxable contributions’ if their income, plus ‘taxable’ contributions are greater than the $300,000 threshold

STRATEGY CONSIDERATIONS

While there are many benefits to having insurance through super, some of the things you may need to consider include:

• How much tax is payable. If your beneficiaries are dependants, such as your spouse or children under 18, the lump sum benefit will be paid tax-free. If your beneficiaries are nondependants, such as your parents or children over 18, the taxable component of the lump sum will be normally be taxed at 15 % (including Medicare levy).

• Potential wait time for payment, for all insurance held within super, any benefits paid within super are paid to the trustee of the super fund, rather than you directly. This can often lead to delays between this time and when you or your beneficiaries can receive the money.

• Different release definitions. In addition to meeting the policy requirements of the insurance company, you may also need to satisfy the conditions of release for superannuation before you receive your insurance proceeds in the event of a claim.

• Reduction in your super balance, as you are paying for premiums from your super balance, it may be worth considering making an additional contribution to cover the cost of your insurance premium

• Reviewing your cover, it is important to review your cover on an ongoing basis and if your personal situation changes then you may need to change your insurance. An event such as purchasing a home, marriage or having children can impact on the level of cover you need. Perpetual offers life stages increase for individuals to increase their level of cover as a result of specific life events, without undergoing medical underwriting, further information is available on our website.

Contact Us

For more information about your insurance cover for super, please contact us on 03 9654 9886, or email to firstpacificfs@gmail.com. We assist our clients in their Personal Financial Management and Planning since 1997.

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Resourced From Perpetual https://www.perpetual.com.au/~/media/Perpetual/PDF/RESOURCES/Educational%20brochures/Insurance_in_Super_Flyer-WL.ashx?la=en

This information has been prepared by Perpetual Superannuation Limited (PSL) ABN 84 008 416 831, AFSL 225246, RSE L0003315 (as Trustee for the WealthFocus Super Plan and Pension Plan ABN 41 772 007 500). The PDS for the WealthFocus Super Plan and Pension Plan, issued by PSL, should be considered before deciding whether to acquire or hold units in the fund it contains general information only and is not intended to provide you with financial 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 advice. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. The information is believed to be accurate at the time of compilation and is provided by Perpetual in good faith.