Insure through super to stretch your cash-flow further

Did you know that if you take out personal insurances through a super fund, you could receive tax concessions, or have your premiums deducted from your existing account balance?

Research has shown that Australians are worryingly underinsured.

If either parent died, a staggering 2.47 million families in Australia are open to the risk of financial hardship. And less than a third of Australian families have Income Protection or Total and Permanent Disability (TPD) insurance1.

Insurance to protect you and your family is crucial.

When tragedy strikes, the last thing on anyone’s mind is money. But it’s at times like this that financial security is needed most.

Having enough cover means you don’t have to worry about what might happen and you can be confident that your family’s future lifestyle is secure.

A smarter way to insure

Buying your insurance through super makes good financial sense, as you may be able to take advantage of a range of tax concessions generally not available when insuring outside super.

For example, if you’re an employee and are eligible to make salary sacrifice contributions, you may be able to buy insurance through a super fund with pre-tax dollars.

These concessions can make it cheaper2 to insure through super, or help you get a level of cover that, otherwise, might not have been affordable.

Alternatively, super can make insurance more affordable if you don’t have sufficient cash-flow to fund the premiums.

Instead of making additional contributions to cover the cost of the insurance, you can arrange to have the premiums deducted from your existing account balance.

The trade-off with this option is that you will use up some of the money that could otherwise meet your living expenses in retirement.

While this could impact your lifestyle when you are no longer working, think of what could happen to your family’s lifestyle in the interim if the worst were to happen.

Without insurance, your family could run down your savings very quickly and face financial difficulty well before your intended retirement date.

Other smart ideas

·  It’s also possible to take out Income Protection insurance in a super fund. If you do this, you could benefit from some tax concessions if you make super contributions to cover the cost, or have the premiums deducted from your account balance without making additional contributions.

However, you should be aware that if you purchase Income Protection insurance outside super, while you will have to pay the premiums from your own pocket, you can generally claim the premiums as a tax deduction. The best approach for you will depend on a range of factors, including the tax implications.

·  It’s generally not possible to hold Critical Illness insurance in a super fund. However, when taking out Critical Illness insurance, outside super, you may be able to reduce the premium costs if you ‘connect’ the cover to Life and TPD insurances held in your super fund.

If you would like more information, please contact <Adviser name and Contact details>

1. IFSA, securing Australians wellbeing, 2007.

2. This will usually also be the case if the sum insured is increased to make a provision for any lump sum tax that may be payable on TPD and death benefits in certain circumstances.

[Adviser business name] is a Corporate Authorised Representative of [Licensee Name] AFSL holder number [XXXXX]

This document contains general information only. <Adviser Company name> is not a registered tax agent. If you wish to rely on this letter to determine your personal tax obligations, you should consult with a Registered Tax Agent. In preparing this information, <Adviser company name> did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, a person needs to consider (with or without the advice or assistance of an adviser) whether this information is appropriate to their needs, objectives and circumstances. No responsibility is taken for persons acting on the information provided. Persons doing so, do so at their own risk. Before acquiring a financial product a person should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product.