Insurance is a Reason to Set Up Your SMSF

Posted by Tim White

Envisioning the future is one thing, making it come true is another. Since we don’t have the crystal ball that could enable us to predict how our lives would turn out to be so we’d know what to do to in certain points, we can at least do proper planning and make the right investments as to ensure future success. This is why Australians are opting for the surefire way of saving up for retirement through SMSFs – the self managed super funds they can manage on their own to save money for the days of old age.

Life Insurance

However, just as much as it’s advisable to join the club of SMSF owners, it’s advisable to consider getting the proper insurance. Though it’s not something that’s mandatory, the new requirement by the ATO (Australian Taxation Office) is for trustees (members of the superannuation) to consider getting SMSF life insurance or TPD (total and permanent disability) and prove this consideration. The reasons to convince you to get insurance are the chance to customise the insurance to a trustee’s specific needs and pay insurance premiums through the fund contributions which means you get the help with cash flow other than that of the fund.

Getting the assistance from professionals, such as insurance brokers and banks, in taking out insurance policy for the SMSF is no trouble, it just takes finding the reliable professionals and knowing whether you’re up for SMSF life insurance or the remaining two, TPD and income protection insurance. It takes learning a bit about them to know which one is most suitable for you and your SMSF.

Life insurance provides a sum when death occurs and can cover up the loss of earnings and financial obligations. TPD can help with medical care and financial obligations in case of total and permanent disability (hence the name of the policy), whereas the income protection provides benefits during inability to work due to an injury or illness. What’s important to remember is that both life insurance premiums and TPD are deductible as tax expense through the fund, while income protection premiums are tax deductible to the fund and individuals alike. This applies to self-employed individuals also and those who earn less than 10% of the income as an employee.

So, in case of death of a member, temporary incapacity or terminal medical condition, you can be able to claim insurance. What everyone needs is the sense of security in the future days of retirement age, and starting up the SMSF accompanied by getting the adequate insurance are the solutions to give you the peace of mind you’re in need of.

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