Recent changes to superannuation legislation present exciting opportunities when it comes to ways of funding life insurance. With choice, however, comes complexity and the challenge is to isolate the benefits offered by the various funding alternatives.
Behind the scenes
The story behind widening the choice for consumers involves two key factors.
Firstly, recent changes to the superannuation regulations introduced a new obligation for super fund trustees to respond to requests from members to roll over funds to another super fund within specific timeframes. This measure was introduced by the Government to give consumers freedom of choice as to the location and spread of their superannuation money.
The second factor is the use of contributions tax rebates. Superannuation funds generally receive a tax deduction for life insurance premiums. Many super funds are now passing that benefit on to the contributing member, allowing the member to reduce the cost of their life insurance cover.
The combination of these two features may provide you with the opportunity to reduce your costs. If your life insurance needs are not being met by your existing superannuation fund, you can access more suitable life insurance cover via another super fund. It is now possible to fund the life insurance by a rollover from your existing fund. The amount rolled over may also be reduced by a 15 per cent tax rebate, delivering a substantial reduction in the cost of your new life insurance arrangements.
But there are considerations…
Before you commit to going down this new path, you should ensure that this option is best suited to your circumstances. You should consider the following three points:
The way forward
The broadening of insurance payment options now gives you a substantial opportunity to ensure that your life insurance arrangements are completed on the most cost effective basis.
If you are eligible for this rebate, and a rollover provides a definitive advantage, all that’s left is to make sure you are comfortable dipping into retirement savings to pay for peace of mind today.
For more information about insurance through super, speak to your financial planner.