To many of us, Superannuation is simply a retirement safety net your employer contributes to on your behalf, with the funds seemingly unattainable for most of your life. However outside of the obvious investment and wealth benefits of such a plan, superannuation also offers some financial benefits with regards life and tpd (total and permanent disability) insurance. We’ll explain a few of the key benefits of insurance in super below so that when the time comes to make a decision on your life insurance with your financial planner, you have some idea of why the planner might be suggesting super as an option for your life and tpd insurance.
Benefits of Life and TPD Insurance In super
- Insurance in super is paid for with concessionally taxed dollars (15%) as opposed to after tax (marginal rate) dollars. For many of us, our marginal rate of tax exceeds 15%, as such, insurance inside super may offer savings due to lower tax rates on the super contributions.
- Superannuation offers “group” buying power for insurance, often but not always, resulting in cheaper rates of insurance for members.
- In different life stages throughout ones life, there may be times where your disposable income is best put to different use (mortgage, children, etc). Insurance inside super doesn’t impact your day to day disposable income as the premiums are paid with your super balance, however the downside is that eventually you pay with a lower super balance.
- Depending on your super fund and the level of insurance required, there are times when insurance through super is easier to obtain due to no health check requirements which may not be the case with life and tpd insurance outside super.
The above clearly explains some of the financial benefits of obtaining your life and tpd insurance within superannuation, while only briefly touching on the negatives (possibly lower balance). Perhaps someday we’ll follow up with a negatives article, however for now the benefits outweigh the negatives in most cases, so we suggest taking some notes and speaking with your trusted financial advisor about whether this might be the right option for you.