Insurance is an important investment, especially for those who have dependents. However, it never comes cheap. In a perfect world, everyone should be able to afford total and permanent disability (TPD), income protection, death benefit and trauma insurance. Unfortunately, in reality, this type of coverage is a luxury most people can’t afford.
However, there are other ways to afford life insurances, such as having them inside the superannuation fund. It can be far cheaper. On the other hand, this superannuation insurance cover isn’t always as extensive as stand-alone insurance policies. So, is having life insurance through your super fund really worth it?
Super Policies Come with Total and Permanent Disability (TPD) & Income Protection Insurance
Apart from life insurance, TPD and income protection insurance are usually covered by super policies. Since superannuation funds buy these policies in bulk from insurance companies, you can save thousands of dollars. Not to mention, they can negotiate group discounts for their members’ life insurance premiums.
Life Insurance Is More Manageable
If you have life insurance inside your superannuation fund, your premiums can be deducted from your superannuation account balance instead of your own bank account. It should make it more convenient for your cash flow especially when you’ve taken out a home loan and you’ve got an entire family to take care of.
To avoid reductions in your superannuation account balance, you can salary sacrifice the cost of your life insurance premiums. This should be great for workers with an average income tax rate as well as for self-employed workers. The latter can claim direct tax deductions on life insurance. In doing so, they will not be able to withdraw the funds they sacrificed to superannuation until they meet a condition of release.
Reduces Retirement Balance
Your life insurance premium reduces your retirement savings. Remember that superannuation is the money you set aside while you’re still working. It’s the money you get when you retire. However, for every dollar you take out of your superannuation savings to pay for insurance premiums, you’ll lose more money from your retirement savings.
Coverage May Be Insufficient
When investors have insurance through their super fund, that means they haven’t been medically underwritten. Most likely, investors aren’t covered for pre-existing injuries. If the insurer finds out that you came to them with a pre-existing injury, you may not receive the coverage you need. To avoid such a mishap, it’s best if you ask what you are and aren’t covered for before taking out the insurance.
Seeking help from a financial adviser should also be good for you. A professional would be able to tell you the types of insurance you need and the level of cover you need. In your application, they will ask you all sorts of medical questions that can help determine what’s necessary for your unique situation. A financial adviser will need to extract as much information as possible so that they can forward it to an underwriter who then determines what you aren’t covered for.
Want to talk to someone about financing insurances? Dollars With Sense has a professional panel formed by experienced industry experts. Put your details down here and one of our qualified consultants will look through your finances, current superannuation structure and implement life insurances into your superannuation scheme.