Life Insurance Through Your Super

Obtain Life Cover through Your Super Funds

When you carry out a thorough examination of your superannuation fund you may find some deficiencies that you would like remedied. You may feel there will be insufficient funds available to properly care for your family if your should die or become totally and permanently disabled. It could also leave you with an inadequate amount to live on in your retirement. All these matters can be attended to if you go about it the right way by placing any additional cover you need through your superannuation fund rather than purchase stand alone policies. But there are certain advantages and disadvantages in doing this that you should be aware of.

What you must keep in mind when dealing with any superannuation fund manager is that any money contained in your super fund is your money. It does not belong to the fund, the fund is the vehicle structured to manage your money for you and to assist in making it grow. The idea is for your money to remain in the fund to assist you financially in your retirement. It is up to you to understand how your particular super fund does this and how you can maximise your benefits for when you retire, as well as what your position would be were you to become incapacitated and unable to work.

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Buying Extra Insurance Through Your Superannuation Fund

Some of the advantages you could get when purchasing any additional insurance you have decided you need through your superannuation fund, can include the following:

  • Superannuation funds are often able to accept additional insurance cover for fund members without them having to submit to a medical examination. This can be particularly advantageous if you are older or not as fit as you once were.
  • The increased premium you will  pay for the extra cover will be before tax, this will effectively lower your taxable income. If you purchased the same amount of cover as a stand alone policy outside your superannuation you would be paying the premium from your after tax income.
  • Because superannuation funds buy insurance in bulk amounts for all the members of the fund they could buy the extra cover you need cheaper than you could as an individual. They can do this by being in a better position to be able to negotiate discounts with the insurer.

Where there are advantages by approaching a matter in one way, there is always something that shows up as a disadvantage. In the case of placing any additional insurance cover through your super fund you may find the following disadvantages also exist:

  • You could be creating a delay in having the benefits of your additional life insurance paid to your beneficiaries. By having the insurance purchased through your superannuation fund any death benefit claim will have to be assessed by the superannuation fund trustees as well as by the life insurance company itself, this could lead to a slower pay out of benefits.
  • Some super funds place a limit on the benefit as well as the amount of cover on income protection insurance. This means the level of cover you are seeking may not be available and you will have to purchase the extra insurance you need as a stand alone policy outside of your superannuation fund cover.

It will be up to yourself to decide if the advantages of buying extra insurance cover through your superannuation fund is worthwhile or if you would prefer to keep and additional cover separate.

Salary Sacrifice

You are able to build your retirement portion of your superannuation fund by making additional contributions either on a regular basis or on the odd occasions when you are able to do so. It is known as salary sacrificing. These extra contributions can be paid from your before tax earnings therefore assisting you in lowering your taxable income. As your superannuation fund increases are usually taxed at 15 percent you will be getting a double advantage in that your extra contributions become a tax effective investment as well as building your total holding for retirement purposes.

Your employer will also be contributing to your super funds growth in the way of the superannuation guarantee. It is presently an amount equal to nine percent of your salary or wages. This is paid in lieu of wage increases in the past that were foregone in favour of forced savings through compulsory superannuation.

Swapping Funds

It is important when changing from one superannuation fund to another that you keep your old fund active until your new fund gets up and going. If you don't do this you could find you are uninsured for a period until the new fund becomes operable. You will also have to make certain that any insurances you have purchased through your old super fund are either transferred or replaced. On some occasions they are simply discontinued and you may not be told about it. It will also be most likely that the cover you will receive for different event that could occur will be different to that of your old fund. You will have to become aware of all these changes and take the appropriate action to make certain you have all the cover in place that you feel you need.

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