Save money and pay insurance premiums through super

Here’s an idea to reduce out of pocket expenses to get yourself covered.

When times are tough, most people look closely at their budgets. To help ease the burden of the cost of insurance, you can pay the premiums through a superannuation fund. This can:

• Provide a tax efficient means of funding the cost of Life insurance, particularly for people on higher marginal tax rates.

• Provide a cash flow efficient means of funding Life insurance.

• Enable lower income earners to benefit from the Government co-contribution if they fund Life insurance inside super with personal superannuation contributions.

• Result in reduced costs, or more insurance for the same cost, compared to holding the insurance outside superannuation.

Note: Contributions to super to pay insurance premiums count towards contribution caps.

Case study

Aaron’s financial adviser helped him set up a Self Managed Super Fund (SMSF) and discussed putting Life, TPD and Trauma cover insurance through the SMSF.

The adviser organised the ownership of the policies between super and non-super. This meant that the SMSF became the policy owner for the Life and 50% of the TPD sum insured (with ANY occupation definition). And Aaron became the policy owner for the other 50% of the TPD sum insured (with OWN occupation definition) and Trauma cover.

The premiums for Life and 50% of the TPD were paid from the SMSF, making them tax effective. The premiums for the other 50% of the TPD and Trauma cover were paid by Aaron from his bank account.

Note: You may want to ensure that new cover is accepted by underwriting before cancelling any existing insurance policies.

Did you know?

You can restructure insurance inside and outside superannuation as your circumstances change.

The above information has been sourced from Norwich Union Life Australia Limited.  

Important Information

The above information provides an overview or summary only and it shouldn’t be considered a comprehensive statement on any matter or relied upon as such. The above information doesn’t take into account your personal objectives, financial situation or needs. It’s important for you to consider these matters before making any financial decision and I recommend you seek help from a financial adviser.