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Insurance within super

Term life insurance

Section: 10.3

Holding personal insurance policies through superannuation can be extremely tax effective as the premiums are able to be funded by pre-tax superannuation contributions such as the superannuation guarantee (SG), salary sacrifice or personal deductible contributions. The other positive thing about this is that the superannuation fund is able to claim a tax deduction for the premiums paid.

Alternatively, a member's existing superannuation balance, spouse contributions or government co-contributions can fund the premium payments.

The function of a term life insurance is to pay a lump sum in the event of the death of the life-insured. Policies will also offer a terminal illness benefit, which allows an advancement of the death benefit in the event that the life insured is unlikely to live, for instance, for any longer than 12 months.

Term life insurance:

  • provides a lump sum benefit
  • may be offered as an ordinary policy via superannuation
  • cover is provided worldwide

The main objective of this cover is protect individuals, families and business in the event of the policy holder passing away. The lump sum received can be used to pay debts, pay funeral costs and provide an income stream to the survivor(s).

This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.

Last modified: Friday, September 25, 2020