Life insurance/TPD cover through SMSF

Discussion in 'Superannuation' started by dlaalueren, Feb 11, 2012.

  1. dlaalueren

    dlaalueren Member

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    Can anyone suggest any Life/TPD insurance providers to be paid through a SMSF that does not cost a fortune? My industry fund is remaining open with a minimum balance only to keep these policies going. I only pay $9.77 per week and this provides me with just under $1million cover for life and the same for TPD. Can anyone suggest insurance providers I could consider to use to receive similar cover that won't cost 5 to 10 times the price?

    That way I can close my industry fund for good!

    Any help and insights will be greatly appreciated.

    Thank you.
     
  2. goldpelican

    goldpelican Administrator Staff Member

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    Premiums will vary with age, health status etc - that's a pretty good premium, but I think similar cover is costing me around $1000 and my wife $800 through super. We went through a broker who got us about four quotes, and we went with two different companies based on cost.

    Get some quotes and see if you can justify getting out of the retail fund altogether.
     
  3. SilverSanchez

    SilverSanchez Active Member

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    Some people dont really believe perpetual life insurance is a good investment.
    If you add up the cost and compare it to accumulated silver (or other investment) over the same period (decades) - the cost does not stack up to the benefit. I'm just encouraging people to crunch the numbers for their specific circumstances and age etc.

    I preffur hospital and extras cover to life insurance
     
  4. nonrecourse

    nonrecourse Well-Known Member

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    There is another problem of taking out life insurance in super and claiming it as a deduction, If and when the policy is paid into the fund if you have been claiming a deduction for the premiums the payout is taxed. Better to take it out in the fund but do not claim a deduction

    Kind Regards
    non recourse
     
  5. Elemental

    Elemental Active Member Silver Stacker

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    This interests me - do you have a reference for this nonrecourse? I have been looking through my references and can't find anything about this (deductibility of premium affecting taxing of benefits).

    Cheers
     
  6. nonrecourse

    nonrecourse Well-Known Member

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    Your right it is difficult to find if you look on page 7 of this document;
    http://www.ccafp.com.au/wp-content/uploads/2010/08/UnderstandingInsurance.pdf

    It is tied up with death benefits paid out to non dependents I think.

    Then I found this example on my hard drive from the Melbourne SMSF Trustees interest group;

    Life Insurance in SMSF

    ATO ID2010/76 Deduction for Life Insurance within SMSF
    will increase the Untaxed Element
    Life Insurance Say $500,000
    Premium $ 1,000
    Tax Deduction 15% $ 150 saved?
    Death occurs after 10 years $ 1,500 saved
    Insurance Payout (untaxed) $500,000
    31.5% to Non-Dependant = $157,500 taxed
    Lump Sum Tax Free to Dependant

    You may be better off not claiming a deduction.


    Kind regards
    non recourse
     
  7. rbaggio

    rbaggio Active Member Silver Stacker

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    My advisor told me TPD is paid through the SMSF. Income protection, however, is not via SMSF but must be done privately, and THIS can be claimed as a deduction.
     
  8. Elemental

    Elemental Active Member Silver Stacker

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    OK The ATO ID cleared it up for me. As I thought.

    Basically the ruling means that deductions claimed for life insurance premiums increase the untaxed element in the fund. This may not necessarily mean you have to pay tax on the proceeds.

    This page on the ATO site describes taxing of death benefits:

    http://www.ato.gov.au/individuals/content.aspx?menuid=0&doc=/content/86194.htm&page=1&H1


    @ rbaggio - the usual set up is income protection outside of super as it is deductible against salary and wage income and TPD through the super fund as it is deductible in the super fund (TPD is not deductible outside of super against regular salary and wage income).

    Cheers
     
  9. nonrecourse

    nonrecourse Well-Known Member

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    Hi Elemental; I like to think way outside the square. If you have a look at the amount of tax your non dependent beneficiaries would have to pay on your demise it is obscene and is effectively a defacto death duty that only applies to super.

    Don't know if you are aware of the anti-detriment provisions to wipe out your beneficiaries future tax obligations. There is only one problem with the deduction... you have to die for your beneficiaries to claim it:lol:

    Kind Regards
    non recourse
     
  10. ajentjay

    ajentjay New Member

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    We set up a SMSF last year, I searched high and low compairing premiums for our TPD, Life and salary continuence insurance but nothing came even close to the low premium we currently pay through our industry super fund. So we also kept those accounts open just to have the insurance through it. Bit of a bummer that we needed to keep $5000 each in that other fund. The premium difference is at least double elsewhere. Our SMSF is with esuper and I was hoping that they would have an affiliation with an insurance company and would be able to provide heavily discounted premiums but that is not the case.
     
  11. jparrie

    jparrie New Member

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    Australian Super only require $1000 to enable you to have insurance.
     
  12. XB

    XB Active Member Silver Stacker

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    They do have "an affiliation" with Macquarie but I have not yet had a chance to compare premiums .... I gather you have so could you tell us what the difference between the "Macquarie Life FutureWise Insurance Product" and your existing premium was?

    (quoted from here ---> http://www.esuperfund.com.au/insurance/howitworks.aspx)
     
  13. ajentjay

    ajentjay New Member

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    Thanks jparrie, I will check them out.

    XB I sure did check out Macqurie, I haven't got the figures in front of me however it was more than double what I pay now through the industry super fund.
     

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