Utilising Your Australian Super to Fund Life Insurance – Considerations for Australian Expats

Affordable Way To Get Cover

We see many Australians living overseas unaware that they can use their super to fund their cash flow and asset protection. Buying Life Insurance through super can be a convenient and affordable way to get the cover you need.

Further, Australian life products are often more affordable compared to the local options and the definitions are world leading.

What To Consider

There are, however, a number of things you need to consider before you decide how you want to structure your Life Insurance.


What type of insurance can you access through super?

Through super, you have access to three important types of insurance cover:

  1. Income Protection which provides an income stream for a specified period if you can’t work due to temporary disability or illness.
  2. Total and Permanent Disability (TPD) which provides a lump sum benefit if you become seriously disabled and are unable to ever work again.
  3. Life Insurance provides your beneficiaries with a lump sum benefit if you die.


What are the advantages of taking out Life Insurance through super?

Using your superannuation to pay for your Life Insurance can be a good way to help you afford the cover you need, without eating into your budget.

You also have the opportunity to make before-tax contributions to super to pay for your insurance (e.g. through salary sacrifice), which may help reduce the amount of tax you pay.


What are the disadvantages of taking out Life Insurance through super?

If you don’t make additional super contributions to pay your insurance premiums, your retirement savings will reduce. Also, there are different rules around Life Insurance policies owned through super that may make benefit payments less tax-effective for your beneficiaries.


What else should expats consider?

Buying insurance through super may seem like the perfect solution, but there are some things you should consider first:


Keep track of your insurances through super

If you have more than one super fund you may be paying for more than one policy.


Not all benefits are tax-free

Tax may be payable on some benefits, depending on who receives the benefit and when it is paid out. If your beneficiary is not a dependant, there may be tax implications.


There can be delays in benefit payment

Insurers will pay the benefit to your fund’s Trustee, who will then distribute onto you or your beneficiaries.


Consider your beneficiaries

If you do not make a binding beneficiary nomination, or your fund does not offer binding nominations, the super trustee will decide who receives your benefits when you die. Usually, benefits are paid to dependents, after taking your wishes into consideration.

Using your super to fund your life insurance is a perfectly viable strategy but being aware of the various considerations is critical. Seeking advice from an Australian Life insurance Specialist key.


Written by: IMFG

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