When preparing the investment strategy for your SMSF, the trustees are required to consider the insurance cover needs for each member of the SMSF and review this annually. Trustees often focus on retirement savings, paying little attention to insurance and the role it can play in providing to dependents in the event of death or disability.
Trustees should consider the personal circumstances of each of the members of the fund including their income, assets and liabilities, any existing insurance cover they have and how they or their family would be impacted by their death or disability. Also it may be relevant to consider how the insurance could be used by the fund to extinguish liabilities or otherwise avoid having to dispose of a large asset to pay a benefit to a member in these circumstances.
When your insurance is held in the SMSF, your super fund becomes the owner of the policy as well as being responsible for paying the premiums. This can be helpful to anyone who needs to increase their cash flow but still understands the importance of personal risk insurance. Also, premiums for life insurance and TPD insurance are usually not tax deductible when held personally, however when they are paid for by your SMSF they generally are tax deductible.
