Make Your Insurance More Affordable

Did you know you can save money by buying your personal insurance in super? This is because super can offer cash flow and tax benefits.

Most super funds offer insurance that can help you, or your dependants, to pay off debt and replace your income if the unexpected was to happen. This includes life, total and permanent disability (TPD) and income protection insurance.

When you insure through super, the premiums are deducted from your super balance. This means you can arrange the cover you need without having to pay the premiums from your ‘after tax’ cash flows.

If you are using super to fund insurance, another consideration is that you will ultimately be utilising funds that are expected to meet your living expenses in retirement. Whilst this could make a difference to your retirement, it’s important to think of what could happen to your family’s lifestyle in the meantime if you don’t have insurance.

Insurance through super can be complex but beneficial in the right circumstances.

How Can I Make It More Affordable?

If you or your family faced financial difficulty you could run out of savings very quickly, well before your intended retirement date. So insuring in super could be a great solution if you don’t have sufficient cashflow to pay for the premiums outside super.

On the other hand, these insurances can be purchased outside of your super. However, apart from income protection insurance, there are no tax concessions for life and TPD (total and permanent disability) and you have to fund it from your existing cash flows.

Even if you think you could pay the premiums outside super, there are still cost effective benefits of insuring inside super. This is because if you make super contributions, there are some tax concessions, regardless of whether the contributions are used to buy insurance or investments. 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,
• if you earn less than 10% of your income from employment (eg if you’re self - employed or not employed), you can generally claim your super contributions as a tax deduction, and
• if you earn less than $46,920 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 $500 in 2012/13 that could help you cover the cost of future insurance premiums.

There are many considerations when deciding if purchasing personal insurance through super is the right move for you. We encourage you to talk to your Altus Adviser to determine if this will benefit your circumstances.