As the sole earner or as a contributing earner in a family, life insurance is important. Family members may suffer financially in the event the earner meets an untimely death. The financial burdens to take care of can be tough. Ensuring that there is financial security in place will help keep the family from economic failure.

Safeguarding a family by taking on life insurance policy involves some important decisions to make. For Self Managed Super Fund (SMSF) member, the purchase of coverage may be done through it or by means of a personal purchase in the member’s name.

Benefits vary but before removing a life insurance policy thorough SMSF, there are things that need to be taken into consideration.

Coverage for SMSF

Superannuation fund contributions could mean the inclusion of a life insurance policy after initially joining the fund. Premiums are typically paid by deducting an amount from the member’s fund account. This is what you call Self Managed Super Fund.

SMSF Facts:


  • It has several retail fund benefits but the life insurance coverage at initial super fund membership becomes invalid and will cease to exist.
  • The initial coverage will also cease upon transferring money from retail fund to SMSF. For continued family protection, life insurance policy through SMSF needs careful consideration.
  • Different types of coverage may be added to SMSF Life Insurance Policy: trauma protection, income protection, permanent disability and injury cover.


Benefits of SMSF Life Insurance


  • As a member, one may qualify for life insurance through SMSF.
  • SMSF member not handling the fund, an SMSF trustee may allow member to take out life insurance policy through the fund.
  • If member has no major issues with the fund or the trustee, they may be given the discretion to remove coverage through the fund.
  • The policy may be paid through the member’s contribution towards SMSF. This means no need for separate fund contributions or a separate life insurance premium payments which is typical when a policy is purchased in the member’s name.
  • More income may be taken home by member instead of a majority of it being locked up in contributions and premium payments.
  • The money paid towards the premiums is in general tax deductible making tax liability lower, hence more money for the member. This, however, are typically offered to whole life or endowment life insurance coverage.
  • SMSF, in general, means more benefits than personal life cover.

The policy benefits are usually credited to the fund when life insurance is taken through SMSF. This means the fund is responsible in paying out the member balance to his or her beneficiaries.

When an external beneficiary is nominated, the amount accrued from a member’s SMSF life insurance policy goes directly to the nominee.


Leave a Reply