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Questions & Answers - Insurance


+ What Insurance Options are available in a SMSF?

Your SMSF is permitted to arrange the following Insurance Policies for its Members:

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    Life Insurance
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    Total & Permanent Disability Insurance
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    Income Protection Insurance

Importantly when you establish a SMSF with ESUPERFUND, Insurance through your SMSF is completely optional. You are under no obligation to have Insurance in your SMSF if you choose not to. Each Insurance Type is discussed in detail here.

+ Does my SMSF have to use a specific Insurer as a client of ESUPERFUND?

When you become a client of ESUPERFUND, your SMSF is permitted to arrange Insurance for its Members. To simplify the Insurance Process ESUPERFUND has established a direct arrangement with AIA Insurance (a product administered by Australian Group Insurances Pty Ltd "AGI") allowing clients to easily apply for Insurance online.

The AIA Group comprises the largest independent publicly listed pan-Asian life insurance group in the world, spanning 15 markets in Asia Pacific. AIA has been in operation for more than 90 years and has total assets exceeding US$100 billion. Through an extensive network of more than 260,000 agents and over 21,000 employees across Asia Pacific, AIA serves the holders of over 23 million individual policies and over 10 million participating members of group policies. The Group has operations in Hong Kong, Thailand, Singapore, China, Malaysia, Korea, the Philippines, Australia, Indonesia, Taiwan, Vietnam, New Zealand, Macau, Brunei and India. More can be found here.

You can choose to obtain insurance through your own choice of provider. These are matters on which you should seek advice, ESUPERFUND cannot provide you with any such advice. However if you choose to take out insurance with AIA, then you can apply for the AIA Insurance Product here

+ What is Life Insurance?

Life Insurance provides a lump sum payment to your family on your death or diagnosis of a terminal illness. Life Insurance is available as a policy on its own, or in a policy that includes Linked Total and Permanent Disability Insurance.

+ What happens on Death if I have Life Insurance?

On Death the Life Insurance Payout is paid to the SMSF Tax Free. The Benefit is in turn paid to your Beneficiaries in accordance with your Death Benefit Agreement if one is in place. If there is no Death Benefit Agreement in place the Life Insurance Payout is paid out at the discretion of the remaining Trustees.

+ What is Total & Permanent Disability (TPD) Insurance?

Total and Permanent Disability Insurance provides a lump sum if the insured person suffers Total & Permanent Disablement. Typically this means that you have been continuously incapacitated for a period of time and the incapacity is such that it is unlikely you will ever resume your usual occupation again. Total and Permanent Disability Insurance can be Linked with your Life Insurance Policy or can be a Standalone Policy.

+ What happens when I receive a Total & Permanent Disability payout?

If you claim on the Total and Permanent Disability Insurance policy the Insurance payout is paid to the SMSF Tax Free. The Benefit can in turn be paid to the Member as a Lump Sum or Pension under the Permanent Incapacity Access Provisions.

+ What is Income Protection Insurance?

Your SMSF is permitted to arrange Income Protection Insurance for its Members. Income Protection Insurance can provide you with an income in the event that an illness or injury prevents you from your employment. You can generally insure up to 75% or less of your normal income, payable up to the age of 65, thereby helping you meet your regular financial commitments.

+ What happens when I receive an Income Protection payout?

If you claim on Income Protection Insurance, the Insurance Payout is paid to the SMSF. The SMSF pays tax at 15% on the payout. The Benefit can in turn be paid to the Member only as a Pension under the Temporary Incapacity Access Provisions. The payout is in turn taxed at the Member's marginal tax rate on receipt less a 15% rebate. Practically this means that the tax on the payout will be the same whether the Income Protection Policy is owned by you or the SMSF. There is no difference.

Who is the Insurance Policy owner?

In order for the SMSF to pay for Insurance Premiums, the relevant Insurance Policy Owner must be in the SMSF name with a specified Member named as the Insured person. You can choose to arrange your Insurance using the AIA Online Insurance Platform through ESUPERFUND. You may also choose to use your own insurer. To learn more about AIA Insurance, click here.

+ How do I pay for my Insurance Premiums?

Once the Insurance Policy has been established the premiums will be paid from the Transaction Bank Account. This allows ESUPERFUND to track the premiums being made and ensure that they claimed in your SMSF Annual Tax Return.

+ Are the Insurance Premiums Tax Deductible in my SMSF?

Yes, the insurance premiums are tax deductible to the SMSF. It should be noted that, Life and Total & Permanent Disability Insurance is not tax deductible in your personal name. Conversely Income Protection Insurance is tax deductible in your personal name. However each of these policies would be tax deductible if held in your SMSF.

+ Can my SMSF have Trauma Insurance?

No. Trauma Insurance covers things like heart attack, stroke etc, and is paid as a lump sum payout. It is not recommended that Trauma Insurance is arranged through a SMSF. This is because in the event of a payout there are no provisions in the Super Laws to allow a Member to access the Insurance Payout unless a Condition of release is met (such as Retirement).

+ Where can I obtain an Insurance Premium Quote?

You can choose to obtain insurance through your own choice of provider and obtain a quote from them directly. However if your choose to take out insurance with AIA, an indication of the likely Insurance Premiums can be found in the Insurance Quote section of our website here.

+ How are the Insurance Premiums paid?

Once the Insurance Policy has been setup the premiums will be paid from the Transaction Bank Account. This allows ESUPERFUND to track the premiums being made and ensure that they claimed in your SMSF Annual Tax Return.

+ How does the Insurance Application Process work through ESUPERFUND?

You can choose to obtain insurance through your own choice of provider and obtain a quote from them directly. However if your choose to take out insurance with AIA, then you can apply for the AIA Insurance Product here, You will need to answer 10 or so simple questions, and the system will instantly provide you with an Insurance Quote. For more on the Insurance Application Process, click here.

+ Where can I find out more about the Insurance Application Process?

The Insurance Application Process is detailed in a Step by Step Guide here.

+ How can I obtain a recommended level of cover for my personal circumstances?

If a decision is made to take out insurance, then the next question is what level of cover is appropriate. This is an important question and turns on factors such as:

  • age
  • annual income
  • number of dependants
  • joint assets and debts
  • current super balance 
  • current insurance cover, and 
  • the age of your youngest child.
These are matters on which you should seek advice, ESUPERFUND cannot provide you with any such advice. You can choose to obtain insurance through your own choice of provider.

 

+ Do I have to have a Medical Examination?

Depending on the amount of insurance cover required, your age and current health, you may be required to undertake a medical examination when you apply for Insurance through your SMSF. This will depend on the insurer, and you can choose any insurer you wish. If you choose to take out your insurance with AIA, then usually a medical examination is not required to obtain the Insurance Offering provided by AIA however, this will depend on your circumstances.

+ How does insurance within your SMSF work?

Members may obtain Insurance through their SMSF.

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    The insurance premiums are paid for by the SMSF, rather than, for example, the Member having to pay for them out of their personal financial resources.

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    The insurance premiums are tax deductible to the SMSF. Life Insurance and Total & Permanent Disability Insurance are not tax deductible in your personal name.

+ Can I transfer an existing Insurance Policy from my Individual Name to my SMSF?

No. 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 may not comply with super regulations 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.

+ Can I transfer an existing Insurance Policy from my current Superfund to my SMSF?

No. Where you already have an Insurance Policy in your current Superfund it is generally not possible to transfer the policy to your SMSF. This means that the old policy will need to be cancelled and a new policy established in your SMSF.

+ How does ESUPERFUND access information about my SMSF Insurance policies?

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.

+ Does ESUPERFUND provide Insurance advice?

No. 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.


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