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Insurance in SMSF

Why insure within your SMSF ?

- the insurance premium is paid from your SMSF bank account, not from your pocket. You do not need worry about your budget.

- the insurance premiums are expenses for your SMSF and can be claimed as deductions. If you buy insurance policies outside of your SMSF, normally only the premium for income protection can be claimed as deductions.

- the insurance premiums are not exempt from deductions even when your SMSF is in pension mode. So you may have tax losses carried forward for future tax planning!

What Insurance Policies Can SMSFs Have?

- Life insurance: This is death cover which provides a lump sum payout of money on death or on diagnosis of a terminal illness that will end in death within 12 months. The purpose of life insurance is to avoid financial hardship after the death of a spouse and keep the family financially sound. The lump sum payout can also be used to fund the anti-detriment payment that can create a huge tax deduction for your next generations in your SMSF.

- TPD (Total and Permanent Disablement) Insurance: TPD cover offers a lump sum of money if an accident or sickness makes you unable to work in either your current occupation or prevents you from ever being employed again. It provides the financial assistance to ensure your debts can be managed and the lifestyle of the family can be maintained. To see how to claim TPD premium deductions, click here.

- Income Protection Insurance: this cover provides a regular payment, generally per month in arrears. It is basically a replacement of your income due to accident or sickness.

So we think it is a very good option to have the insurance policies in your SMSF. Just be aware that if your employer pays the insurance premium on behalf of your super fund, it will be treated as concessional contributions.

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