Insurance within Super

If you buy personal insurances such as Life and Total and Permanent Disability through a super fund, you may be able to take advantage of a range of ‘upfront’ tax concessions generally not available when insuring outside super.

For example:
If you’re an employee and are eligible to make salary sacrifice contributions, you may be able to buy insurance through a super fund with pre-tax dollars (see case study)

If you earn1 less than 10% of your income from employment (eg you’re self-employed or not employed), you can generally claim your super contributions as a tax deduction – regardless of whether your contributions are used by the super fund to purchase investments or insurance, and
if you earn1 less than $61,920 pa, of which at least 10% is from employment or a business, and you make personal after-tax super contributions, you may be eligible to receive a Government co-contribution of up to $1,000 that could help you cover the cost of future insurance premiums.
These concessions can make it cheaper2 to insure through a super fund, or help you get a level of cover that, otherwise, might not have been affordable.

Case Study
Jack, aged 45, is married to Claire, aged 41. Claire is taking a break from the workforce while she looks after their young children. Jack works full-time, earns a salary of $100,000 pa and they have a mortgage.

After assessing their goals and financial situation, their adviser recommends Jack take out $700,000 in Life insurance so Claire can pay off their debts and replace his income if he dies. The premium for this insurance is $827 in year one.

Their adviser also explains it will be more cost-effective if Jack buys the insurance in a super fund. This is because if he arranges with his employer to sacrifice $827 of his salary into super, he’ll be able to pay the premiums with pre-tax dollars4.