Generally, your SMSF can provide insurance for members for an event that meets a conditions of release including death, terminal medical condition, permanent incapacity and temporary incapacity.
Arranging Insurance
As part of creating an investment strategy, your fund must consider insurance. This does not necessarily mean it needs to be purchased but it must be considered. You can take out a range of insurances in your SMSF including:
- life insurance
- total and permanent disability (TPD) insurance
- income protection
- terminal medical condition insurance
Other types of cover including trauma insurance cannot be purchased using your superannuation and must be taken out personally.
It's important that any new policy in your SMSF is in place before you cancel other policies you have, including policies in your previous super fund. This protects you from missing out on insurance if there are delays or other problems with the new insurer accepting your SMSF's application. So if you are transferring your whole balance from your old super fund to your SMSF, make sure you arrange for your new insurance to become effective before cancelling.
A few tips for you...
- Make sure the name of your SMSF is on the policy documentation as the owner of the policy. Technically this means that if you die, the money isn't paid directly to your beneficiary (e.g. your spouse) it is paid to your SMSF which then makes a payment to your beneficiary.
- Send Heffron a copy of the policy as soon as possible so that we can review it for you and make sure it meets all the SMSF requirements.
- Pay the premiums from your SMSF, not from your personal account.
- Your SMSF can claim a tax deduction for insurance premiums, including some premiums that would not be tax deductible if you had the insurance cover in your own name. We will review the insurance policy and take care of this when we prepare your fund's tax return.
- Get help from an adviser if you are unsure about whether all your insurance needs are covered.
