Why you need to consider life insurance

An SMSF can offer you more control, but it also comes with a lot more responsibility. As an SMSF trustee, you’re taking on some important obligations, including the decision whether you (or other members in your SMSF) need life insurance.

Have you thought about how your dependents would cope financially if you became seriously ill or injured, or pass away? How will they pay household bills or manage debt?

Life insurance – what are your SMSF member’s needs?

In some cases there may be little or no need for insurance. For example, if members have sufficient assets and savings which are readily available (i.e. liquid assets), or if a member has retired, has little or no debt and sufficient retirement savings.

On the other hand members may have a real need to protect their financial plans and retirement outcomes if they are unable to work. Considering that 1 in 3 males and 1 in 4 females will be diagnosed with cancer by the age of 75¹, life insurance is important to provide financial protection for you or other members in your SMSF from the unexpected illness or injury.

Other considerations

In addition to protecting the financial independence and lifestyle of your members, life insurance in your SMSF may also provide cash flow, tax advantages and liquidity:

1. Cash flow and tax advantages

Insurance in your SMSF can be paid using pre-tax dollars, as opposed to your post-tax dollars, which are taxed at your marginal tax rate (up to 47%). Paying for insurance premiums through superannuation may also provide cash flow benefits – meaning you don’t have to dip into your own pocket.

2. Liquidity

If you have illiquid assets in your SMSF, for example, property, insurance in your SMSF can help to avoid the SMSF having to sell assets unexpectedly in the event of a member passing away, or becoming disabled. Regulations require SMSFs to release benefits upon the member’s death. Life insurance in your SMSF can help fund this member benefit without having to sell any illiquid assets.

Get a Quote and Apply Online

To obtain an Insurance Quote or to Apply Online with AIA Insurance click here.

^{1. Cancer in Australia an overview 2012, Australian Institute of Health and Welfare Canberra}

General Advice Warning

No Advice Express or Implied: The contents of this website are of a general nature only and have not been prepared to take into account any particular investor's objectives, financial situation or particular needs. ESUPERFUND does not provide financial product advice or recommend any financial products either expressly or implied. ESUPERFUND expressly states that it does not recommend, represent as suitable, or endorse any financial product or service available through ESUPERFUND. This applies equally to those financial products which are established for your SMSF when you become a client of ESUPERFUND. Any information provided in relation to any financial product or service available through ESUPERFUND is factual information only about the operation of the account and how data is made available to ESUPERFUND. Where this website refers to a particular financial product then you should obtain a Product Disclosure Statement (PDS) relating to that product and consider the PDS before making any decision about whether to acquire the product. We also recommend that you should seek professional advice (see below) from a financial adviser before making any decision to purchase any financial product referred to on this website. While the sources for the material are considered reliable, responsibility is not accepted for any inaccuracies, errors or omissions.

Seek Professional Advice from a Financial Adviser: ESUPERFUND is a no advice model and does not provide financial, legal or tax advice to clients. We recommend that you seek appropriate professional advice in view of your personal circumstances. A licensed financial adviser will consider your personal situation and make a recommendation suitable to your financial needs. All information detailed on our website is purely factual and is general in nature. Accordingly, you should not rely on it. It should always be remembered that Trustees are legally responsible for all the decisions made even if you obtain advice from a Financial Planner. Whilst a Financial Professional can provide advice and assistance you are ultimately responsible for the Fund.

Fees: Fees relating to operating your SMSF with ESUPERFUND are detailed on our fee page here. When setting up a SMSF it is important to understand that additional fees may apply that must be carefully considered prior to making a decision to setup a SMSF including an ATO Supervisory Levy, Company Trustee Setup Fee (where applicable), and Investment Fees.