Why Get Insurance Inside Your SMSF

talk to a financial expert when planning to get insurance inside your SMSF

Getting Life Insurance is a crucial consideration. It doesn’t matter whether you plan to get your insurance inside your SMSF or self-managed super fund, in another super fund or totally outside your super. It helps protect the financial future of your loved ones once you pass away.

The same goes for Total and Permanent Disablement (TPD) Insurance and Income Protection of Insurance. These two policies can ensure you (and your family) receive monetary benefits should you suffer an injury or illness that prevents you from working.

It’s a good thing that you can get these three crucial insurance policies inside your SMSF. After all, retirement planning is all about being ready for anything. With a Life, TPD and income protection insurance set inside the SMSF, members can rest assured that their savings and investments will remain secure in case of an unfortunate event. Their spouses and other dependents don’t also have to face financial stress during the most difficult time of their lives.

Besides that, here are other benefits of getting insurance inside your SMSF:

Insurance inside your SMSF creates better cash flow.

One key benefit of having Life Insurance within your SMSF is having a better cash flow. Your contributions to your super fund will cover the cost of the premiums for your Life Insurance. It takes the pressure off your day-to-day budgeting. You can enjoy a better cash flow as you no longer have to think of how to pay for these premiums as they’ll be deducted automatically from your SMSF.

It brings tax benefits.

Buying insurance within an SMSF allows you to have deductible expenses that would otherwise not be available. That’s because premiums for Life Insurance and TPD Insurance may be available as tax deductions for the SMSF.

get insurance inside your SMSF to enjoy tax benefits

On top of this, death benefits are tax-free when paid from a superannuation fund. That’s regardless of whether you’ve already claimed a tax deduction for premiums or not. Note, however, that insurance benefits paid to a non-dependent may come with tax. Plus, non-dependents might only receive death benefits as a lump sum.

It offers property protection.

If you’re investing in property within your SMSF through a Limited Recourse Borrowing Arrangement (LRBA), you need to have Life Insurance inside the SMSF. Otherwise, your SMSF may have to sell other investment assets should a fund member pass away and no Life Insurance is available to provide benefits to that member’s dependents. In a way, having Life or TPD insurance helps protect the real estate assets within your SMSF.

Insurance inside your SMSF gives you the advantage of choice.

As an insurance policy owner within your SMSF, you can keep having the advantage of choice. You have the authority over who should benefit from your Life Insurance when you pass away. Through constant SMSF reviews, you can revise your policy to reflect the changes you’ve had in your life. Say you’ve recently had a newborn. You can that child on your list of beneficiaries with ease if you have Life Insurance inside the SMSF.

Final thoughts

Insurance and SMSFs work better together. Don’t miss out on the advantages you can reap when you choose to obtain insurance inside your SMSF. 


Leave a Reply