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Are there disadvantages of insurance through superannuation?

Generally, holding your Life and Total and Permanent Disability insurance through superannuation is appropriate for most people’s situations.

However, Income Protection through superannuation has additional restrictions due to a policy having to meet a “Temporary Incapacity Condition of Release” under Superannuation legislation. This condition limits the features of any Income Protection held within super and reduces the circumstances where a payment can be made. Generally, you will get a better policy outside super.

In addition, premiums for Income Protection held outside super are generally tax deductible against your personal income, depending in your circumstances (you should see your accountant for any tax advice specific to your situation). This can reduce the net cost of Income Protection.

Insurance within super is attractive to most people because, aside from the ability to have retirement savings pay for premiums, costs are generally lower inside superannuation than insurance offered directly by insurers (providing you are in an industry fund). However, once you remove the commission from any insurance policy, inside or outside super, the costs are similar. In fact, depending on your age, occupation and sex, the insurance in your industry fund is probably not the cheapest option available.

Trauma insurance is not available through superannuation, so you will have to go direct for this cover.

Your individual situation will determine which is the most appropriate set up for you. Contact us if you want advice.

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