Trustees must determine if SMSF members need insurance as part of their investment strategy. The majority of super funds come with life insurance, which pays out a lump sum in the event of your death, and total and permanent disability (TPD) insurance, which pays out a lump sum if an illness or accident renders you totally and permanently disabled. SMSF insurance protects members’ funds from risks, and making the right decision is crucial for self-managed super funds. Also, aligning insurance decisions with estate planning can provide significant benefits to members. Here are some important considerations and tips to ensure the right coverage.

Why Would You Keep Insurance in Your SMSF?

SMSFs offer tax-deductible insurance premiums for life, total and permanent disability (TPD), and income protection, making them more affordable for members. The SMSF trustee owns the policy and pays premiums, while the insured person is the insured person. SMSFs can hold insurance coverage that meets superannuation conditions of release, such as death, permanent incapacity, and temporary incapacity. 

SMSFs can tailor their life insurance policy to meet the specific needs of each member, making it more flexible than group insurance coverage offered by retail or industry super funds. Additionally, SMSFs can provide property, audit protection, and trustee insurance to protect the value of SMSF Property Brisbane in the portfolio or indemnify trustees or directors against legal liability in case of compliance errors.

Why Maintain Insurance Outside of Your SMSF?

Seek financial advice before cancelling any current insurance policies or transferring your entire industry or retail super balance to your SMSF. Your current insurance arrangements may provide more benefits or be less expensive than those available today. Consult a personal insurance specialist if you decide to take out new policies through your SMSF. Some insurers offer policies specifically designed for SMSFs, demonstrating the value of group discounts.

It’s also important to remember that your insurance premiums will be paid from your fund, which may reduce your retirement savings balance. If you make a claim, the insurance benefits that are paid from the SMSF may be taxed differently than if your policy was held outside of super. Make sure you have enough money in your SMSF bank account to cover the monthly or annual insurance premiums, as they will be deducted from it.

How Should Your Exit Strategy be Planned?

Coordinating your estate plan with your SMSF strategy is crucial for your super, as it is one of your most valuable assets. A specialist financial and legal adviser can ensure death benefits are paid from the SMSF in the form of a lump sum, an income stream, or a combination of both. They can also assist in developing processes to ensure the SMSF can continue even if one of its members dies unexpectedly. 

If a trustee’s failing health limits their ability to manage investments, outsourcing investment management to a financial adviser may be better than closing the fund prematurely. Even if you are a Self Managed Super Funds Brisbane trustee or director, you may still wish to make a death benefit nomination, which applies after your death. Insurance and estate planning are important tools for mitigating risks and preserving capital for your family’s long-term financial security.

Conclusion

Before you wonder how to set up self self-managed super fund for your future planning, you should know that for SMSF trustees who have the goal of securing their members’s futures, SMSF insurance and estate strategies are vital. You should take the matter of incorporating insurance within an SMSF seriously. It is important to keep various risks away from their members’s funds. Not only financial protection but also securing assets is what insurance and estate planning go for.