Can SMSF Pay For My Life Insurance and Income Protection Insurance?

A Self-Managed Super Fund (SMSF) can certainly cover the cost of life insurance, income protection and TPD insurances. This isn’t merely a financial tactic, but a legal obligation. The law stipulates that those who manage an SMSF, known as trustees, must take into account for insurances such as life insurance requirements of their members. This is a fundamental part of overseeing an SMSF, as it guarantees that members have adequate protection against the unpredictability of life.

Among the insurance policies that SMSFs can purchase, three types stand out due to their relevance and importance to the financial security of members. These include life insurance, total and permanent disability (TPD) insurance, and income protection insurance.

Life insurance, also known as death cover, provides a lump sum payment to the beneficiaries upon the death of the insured member. This can help alleviate the financial burden that might otherwise fall on the loved ones of the deceased.

Total and Permanent Disability (TPD) insurance offers a lump sum benefit if the insured member becomes totally and permanently disabled. This type of cover can provide financial support for medical expenses, debt repayments, and ongoing living costs, thereby offering a financial safety net in a time of need.

Income Protection insurance, on the other hand, provides a regular income stream, usually up to 70% of the insured member’s pre-disability income, if they are unable to work due to illness or injury. This can help maintain the member’s lifestyle and meet their financial commitments while they recover.

SMSFs offer a unique opportunity for members to manage their superannuation and insurance needs in a cohesive manner. By allowing the purchase of life insurance, TPD insurance, and income protection insurance, SMSFs provide a comprehensive financial safety net for members, protecting them and their families against life’s unexpected events. As always, it’s advisable to consult with a financial advisor or insurance broker to understand the best insurance options for your specific needs and circumstances.