Your life insurance policy can be held either inside or outside of your superannuation, but which one is better? There is no right or wrong answer as everyone situation is different. If you aren’t sure what is the best option for you and your situation, please contact a Camori insurance specialist today.
If you take out the standard insurance cover provided by your super fund, then no medical exams are required. This can be beneficial if you have pre-existing conditions, however if you would like more comprehensive cover then medical exams may apply. Note that an exclusion period may apply for pre-existing conditions.
To make it easier on your household budget your life insurance premiums can be deducted directly from your superannuation account. Freeing up your cashflow and leaving you with extra money.
Most super funds provide death, total and permanent disability (TPD) and income protection insurances. This allows for savings on premiums as bulk and multiple policy discounts are applied.
Due to the number of members in most superannuation funds, they can negotiate bulk discounts on life insurance policies with the savings passed onto you. Purchasing your life insurance policy inside your superannuation fund could result in cheaper premiums.
You may have the option to salary sacrifice the cost of your premiums. This way the premiums are taken from your pre-tax salary and this could be an effective tax strategy for you.
The standard level of coverage may not be enough for you; it’s important that you check the level and if required, apply for additional coverage. The same is true for the income protection component as it may only cover a low percentage of your income for a short period of time. It’s important that you understand exactly what you are covered for.
Trauma insurance usually isn’t offered by super funds. Trauma insurance provides a lump sum payment to cover immediate medical expenses and financial needs when a critical illness or injury happens. Trauma insurance is standard with life insurance policies outside of your superannuation. If the need arises your income protection can be used to cover some of the financial burdens when a critical illness or injury happens.
Due to the nature of how super funds work, the payments on life insurance policies can be delayed. Insurance payouts are paid to the super fund trustee before you and hence can take longer than when using a stand alone insurance company.
If your life insurance premiums are taken directly from your superannuation fund, this results in a lower superannuation balance. In the short term it might not sound like much, however over time this could have a considerable impact on your retirement saving.
We encourage you to speak directly to a Camori Insurance specialist to determine the best way to structure your superannuation and insurances.