Superannuation and life insurance are similar in that they both provide for you financially when you may not be able to provide for yourself. No matter how comprehensive and successful your Investment Plan may be, the most important asset you and your family have is your health. Without your health, you lose your ability to provide for yourself and your family on a day to day basis, let alone meet your long term goals. By taking out Insurance through your SMSF, you can be comforted that if the worst happens, you and your family will be protected.
How it Works
The SIS Act requires all SMSF Trustees to consider the insurance needs of your members as part of the fund’s investment strategy. When you become a client of ESUPERFUND, your SMSF is permitted to arrange Insurance for its Members. To simplify the process ESUPERFUND has established a direct arrangement with AIA Australia (a product administered by Australian Group Insurances Pty Ltd "AGI") allowing clients to easily apply for insurance online. To learn more about AIA Australia and AGI, click here
Why insure within your SMSF?
There are two main reasons why Members obtain Insurance through their SMSF rather than in their Individual Name namely:
1. The insurance premiums are paid for by the SMSF, rather than the Member having to pay for them out of their own financial resources. This alleviates personal cash flow concerns about how to fund the Insurance Premiums.
2. The insurance premiums are tax deductible to the SMSF providing an effective 15% tax saving and in turn an "effective" reduction in the annual premium. Note that Life Insurance and Total & Permanent Disability Insurance are not tax deductible in your personal name.
Avoid Audit Issues
Based on the results of our annual audit compliance process, ESUPERFUND has identified that in almost 50% of cases, clients have arranged Insurance in their personal names and are making the Insurance Premium payments from their SMSF Bank Account. This is illegal. In order for the SMSF to pay for Insurance Premiums, the Insurance Policy Owner must be in the name of SMSF with specified Member named as the Insured person. By arranging your Insurance using the AIA Online Insurance Platform, you can be assured that the Insurance Policy will be established correctly. This ensures that your Insurance Policies are compliant with Super Regulations.
Cannot transfer from Individual Name
Where you already have an Insurance Policy in your personal name you must ensure that the SMSF does not pay for the Insurance Premiums. Most clients attempt to resolve this issue by transferring the Individual Policy to their SMSF. This is illegal and you must ensure this is not done. If you have an Individual Insurance Policy and want this transferred to a SMSF you must cancel the existing policy and arrange for a new policy in the name of the SMSF to be implemented. This can be done through the AIA Online Insurance Application here
Accessing Information by ESUPERFUND
Data for all SMSF Insurance Policies established directly through ESUPERFUND are electronically accessible by ESUPERFUND alleviating you of the responsibility of maintaining these records at financial year end.
The ESUPERFUND Insurance Service is provided on No Advice Basis. Clients will need to determine if the AIA Insurance Product is appropriate for their financial situation based on their particular needs.
Insurance Service Not Compulsory
The ESUPERFUND AIA Insurance Product is provided to simplify the Insurance Application Process. Whilst it is strongly preferred that the AIA Insurance Product is used to simplify the annual compliance process, it is not compulsory and clients can implement Insurance with any Insurer they choose if preferred.