Insurance cover is important in any person’s life as it can help support dependents in the event of a death or even provide income when an individual is temporarily or permanently unable to work. Some of the benefits of obtaining insurance cover through super will be outlined below.
Generally, most Australians members of a superfund receive basic Death and Total & Permanent Disablement (TPD) insurance cover upon joining. Many superfund members automatically receive this cover when they join their superfund. This means that individuals are not required to provide any health information to obtain this type of cover.
A further benefit of receiving insurance cover through super is that the super is paid from the member’s super and not their disposable income. This removes the worry for individuals that are unable to make the premium payments during some periods of the year due to their uneven cash flow. It is possible that individuals will save tax, because their insurance costs are generally paid from before-tax contributions.
Another benefit is that it is often a cheaper insurance option. This is because super funds purchase insurance policies in bulk. This means that it may be easier to get the cover you need for your family even if money is tight.
However, when obtaining insurance cover through super, you should be aware that:
- In the event you have more than one super fund you may be paying for insurance cover in each fund, which may be an unnecessary cost.
- If you fail to make a binding death benefit nomination, the super trustee has discretion as to who gets your benefit when you die. Generally, benefits are paid to dependents after taking your wishes into account.
- There may be delays in payment of life insurance benefits as these funds initially go to the fund. The fund then distributes them to you or your beneficiaries.
- There may be tax implications if your super recipient is not a dependent.
If you require any further information regards to the above, please do not hesitate to contact the tax accountants at The Quinn Group on (02) 9223 9166 or submit an online enquiry form today.