Does your ‘super’ look so super with insurance?
Have you super-charged your insurance?
Charging your superannuation with life insurance costs has its merits – but there are also negatives to that strategy as well. Having your super account carry the cost of your personal risk insurance can make sense. There are important issues to consider in using your super to pay for your life cover. The rewards for getting them right include –
- you and your family will be able to comfortably sleep at night knowing financial security; and
- you will enjoy the affordability of the protection without impact on current cashflow!
Consideration of charging life insurance costs to superannuation
There are a number of considerations, both for and against charging your personal risk insurance costs to your superannuation account –
Some ‘fors’:
- What types of cover are provided? (You will benefit from understanding their appropriateness to your current needs. Knowledge of the available products ensure your ability to stay ‘covered’ appropriately as your needs change?)
- Has the level of insurance cover been matched to your needs at any particular time? (An insurance needs analysis conducted by an experienced financial adviser, reveals what you need to know here.)
- Are the conditions of the policy appropriate to your financial and family circumstances? (Life insurance policies within superannuation are usually subject to different terms of acceptance, different definitions and claim eligibility. They are not always transferrable as you move to a new employer/ superannuation provider. Make yourself aware of the effectiveness of the protection on which you and your family will rely.)
- Are insurance premiums being deducted from your superannuation account competitive? (The value for the premium paid is relevant here, than the cost of the cover.)
Some potential ‘againsts’:
- Are the policies and protection transferrable? (Each superannuation provider will answer this question. For example, not all industry funds will accept transfer of cover from another industry fund. Not all retail funds necessarily accept roll-over of life insurance within superannuation of another provider.)
- Is there a continuation option in the event that you leave your current employer? Does that option also apply if you elect to change to a different provider?
- Can you prevent the level of cover from diminishing as you age (and possibly undertake higher financial obligations)?
- Are you able to nominate beneficiaries within the superannuation account so as to be able to ‘customise’ your estate planning?
- Are the premium costs, tax deductible?
Super charged life insurance or other alternatives
Life insurance within superannuation is the only life insurance held by many Australians. The fact that they have ‘some’ insurance protection exists is a good thing. Better to have some insurance, than to be uninsured. The more common problem in Australia is that people are underinsured!
An insurance needs analysis by an experienced life insurance financial adviser will identify if the status of your insurance cover.
A review of your personal situation may reveal whether your superannuation provider is the most appropriate for you. Life insurance offerings within super are not all the same: and those by similar super funds also differ.
Changing superannuation providers won’t necessarily increase the balance in your account, but –
- strategies to increase the amount accumulated whilst charging insurance costs to the account are available; and
- a qualified, experienced financial adviser/ planner can ensure that you are utilising your superannuation account in your best interests.
Insurance providers are understanding (and tolerant) of the rules around superannuation and have designed policy products that can be taken conjointly within and external to, superannuation. This can be a useful strategy, minimising the cost of any protection that may not be deductible for tax purposes.
Personal risk insurance interaction with estate planning and superannuation is an important consideration. Each of these areas contains considerable complexities that are are well handled by your experienced financial planner. They are skilled to –
- evaluate your circumstances,
- perform a needs analysis,
- review available offerings from the appropriate providers and,
- along with quotes for the costs of the various options,
- provide recommendations for your consideration as to the structure and complexity of your protection.
Wanting help with strategic funding of life insurance costs?
The qualified, experienced team of financial advisers at Continuum Financial Planners Pty Ltd can assist you with ensuring that your life insurance cover is both relevant to and adequate for, your identified needs. Super charging your life insurance can be managed to provide as financially independent a retirement as possible for you.
To make an appointment with one of the team to discuss charging your super with some of your life insurance cost –
- please call our office on 07-3421 3456; or
- at your convenience, use the linked Make A Booking facility.
(This article was first published by us in July 2011. It has occasionally been updated/ refreshed, most recently in January 2025.)
