Life

Life insurance protects your family by paying a lump sum if you die. Most people think that life insurance is only for the main income earner, but the person who takes care of the family is also a large contributor to the home and can be insured.

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Many super funds provide life insurance. Premiums can be paid from contributions made to your fund by your employer, by you personally or simply deducted from your account balance in the fund.

TPD

TPD cover provides a lump sum payment if you suffer a disability before retirement and can’t work again, or can’t work in your usual occupation or chosen field of employment.

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You can buy TPD as an add on to term life insurance, or as a stand alone product. You can also get TPD as an extra benefit from your super fund or as part of a trauma insurance product.

Trauma

Trauma (or critical illness) insurance provides a cash lump sum if you suffer a specified illness or injury. Advances in medical treatment have increased the need for trauma insurance. The improved chance of survival means that although you are more likely to survive, you are also more likely to have substantial medical bills to pay.

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Trauma insurance is usually purchased as a stand alone policy, but can be purchased with additional options, such as a TPD benefit. Trauma insurance is generally not available through superannuation.

Income

Protection

Income protection insurance (also known as salary continuance or income replacement) provides a monthly payment to replace lost income if you are unable to work due to injury or sickness.

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The maximum allowable cover is generally 75 per cent of your gross wage. Payable for a specified benefit period. The longer the benefit period, the higher the premium. Income protection is available through your super fund or can be purchased as a stand alone policy outside of super.

With Your

Super

Life, TPD and income protection insurances are all offered within superannuation. If your insurance is held within superannuation, the cost of the premiums is withdrawn from your superannuation balance. It is important to work out the best way to structure your insurance, whether inside or outside superannuation, or a combination of the two. (These options are best looked over as part of a complete in-house assessment as to what is the best option for your circumstances.)

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Benefits to having insurance in your superannuation may include (but not always include):

•  automatic acceptance – there’s generally no need to complete medical checks

•  cheaper cover – from the bulk discount typically available to superannuation funds, and

•  tax deductibility – some contributions to superannuation attract a tax deduction, so you may be able to pay your premiums by making tax deductible super contributions.

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Disadvantages of having insurance in your superannuation include:

•  limitations on the types of cover available

•  potential delays in the payment of benefits in the event of death, and

•  high tax rates – superannuation death benefits paid to a non-dependant may be taxed at up to 32 per cent.