Paying Insurance Premiums Through Superannuation
Here's an idea to reduce out of pocket expenses for you.
When times are tough, most people look closely at their budgets. To help ease the burden of the cost of insurance, they can pay the premiums through a superannuation fund.
This can:
- provide a tax efficient means of funding the cost of life insurance, particularly for individuals on higher marginal tax rates
- provide a cash flow efficient means of funding life insurance
- enable lower income earners to benefit from the Government co-contribution if you fund life insurance inside super with personal superannuation contributions
- result in reduced costs, or more insurance for the same cost, compared to holding the insurance outside superannuation
Note: contributions to super to pay premiums count towards contribution caps.
Did you know?
With some Insurance providers you can restructure insurance inside and outside superannuation as your circumstances change. You can split insurance between both superannuation and personally owned policies.
Case Study
Aaron's financial adviser helped him set up a Self Managed Super Fund (SMSF) and discussed putting Life Insurance, TPD Insurance and Critical Illness Insurance through the SMSF.
What the adviser also did was to split the ownership of the policy between super and non-super. This meant that the SMSF became the policy owner for the Life Insurance and half of the TPD sum insured (with ANY occupation definition). And Aaron became the policy owner for the other half of the TPD sum insured (with OWN occupation definition) and Critical Illness.
The premiums for Life and 50% TPD were paid from the SMSF, making them tax effective. The premiums for the other 50% of TPD and Critical Illness were paid by Aaron from his investment account.
Note: You may want to ensure that new cover is accepted by underwriting before cancelling any existing insurance policies. Phone and talk to us at Aussie Life Brokers.
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