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 Frequently Asked Questions This guide will assist you in purchasing the most suitable cover based on General Advice and Factual information. It answers the most frequently asked questions from trustees and members of Self Managed Superannuation Funds. If you have others, please contact us for a prompt response. Term Life Insurance What is Term Life Insurance? Why do I need Term Life Insurance? How much Term Life Insurance should I have? Who should own the policy? Can I add Term Life Insurance to my SMSF? Income Protection Insurance What is Income Protection? Why do I need Income Protection? How much Income Protection do I need? What features should I look for in an Income Protection Policy? How important is my occupation in determining my premium? Can I add Income Protection Insurance to my SMSF? Who should own the policy? Purchase Information Can I increase my level of cover? Will I need a Medical Examination? Will I be required to provide financial information? Can I change cover from another insurer? Term Life Insurance What is Term Life Insurance? It is a type of policy which provides a lump sum payment to your loved ones on your death or on diagnosis of a terminal illness. It is the least expensive form of life cover. You may also need to provide for an amount to be paid to you upon diagnosis of a total and permanent disability. Total & Permanent Disablement (TPD) is a low cost option where Income Protection or Trauma Insurance is too expensive or unavailable due to a person's occupation or health. Under current legislation, premiums paid for Term Life & TPD under a Self Managed Super Fund or under a Life Company Super Fund, the Life Insured may claim a tax deduction. Why do I need Term Life Insurance? Term Life insurance provides vital protection to cover your dependants against outstanding debts, eg. a home mortgage or personal, business or investment loans should you die. Benefits paid to dependants under Self Managed Super Fund are tax free. It is also taken as a means of creating a capital sum for investment to provide a regular income for your family or partner should you no longer be able to do so because of your premature death or total and permanent disability. Cover should not be limited to the main income earner. If you are a Home Keeper, you should also be protected. It makes good sense to also cover your loved ones against your premature death or total and permanent disability. How much Term Life Insurance should I have? The amount of cover required will vary according to your individual needs. As a minimum you should own enough life insurance to clear all your personal or business debts plus any funeral or death related expenses. To protect and provide for your dependents you should have additional cover to the equivalent of 10 to 20 times your present income. For families the higher cover will be needed for the main income earner. For one income families, a Home Keeper should insure for half this sum. This amount would enable your family to maintain their current lifestyle using the income generated by investing the lump sum they would receive upon the death of either parent. Need help finding how much cover you need? Use our handy calculator to get an estimate. Who should own the policy? If you are a trustee or member of an SMSF then the policy should be owned by the fund. To protect your dependants you can complete and sign either a binding or non-binding nomination of beneficiary form. FCA recommends you seek independent advice from the administrator of your SMSF or an external trustee service. Can I add Term Life Insurance to my SMSF? Yes, as a result of changes announced in the 2006 Federal Budget, Reasonable Benefit Limits (RBL's) have been removed providing significantly improved tax benefits for trustees and members of SMSF's. Increasing levels of insurance cover within an SMSF is now widely recognised as a tax effective strategy. 
Income Protection Insurance What is Income Protection? Income Protection is an insurance policy which provides you with an income if you are unable to work because of a serious illness or injury. The benefits are paid monthly for the period of incapacity or the duration of the policy whichever is the shorter period. Why do I need Income Protection? Term Life insurance provides vital protection to cover your dependants against outstanding debts, eg. a home mortgage or personal, business or investment loans should you die. Benefits paid to dependants under an SMSF are tax free. It is also taken as a means of creating a capital sum for investment to provide a regular income for your family or partner should you no longer be able to do so because of your premature death or total and permanent disability. Cover under an SMSF should not be limited to the main income earner. If you are a Home Keeper, you should also be protected. It makes good sense to also cover your loved ones against your premature death or total and permanent disability. How much Income Protection do I need? Most policies permit you to cover up to 75% of your present income and, although you can nominate a lesser amount, most people take out maximum cover. What features should I look for in an Income Protection Policy? Your policy should include the following benefits:
Your occupation is one of the most important factors in determining your premium rate. Certain occupations are expected to create a higher percentage of claims and therefore a higher premium is charged for these occupations. Can I add Income Protection Insurance to my Self Managed Superannuation Fund (SMSF)? Yes. The monthly income benefits can continue until retirement or when your income would normally have ceased, usually when you reach age 65 (unless otherwise limited by the terms of the policy). Who should own the policy? It can be owned under an SMSF for benefit payment periods of up to age 65. Although a tax deduction may apply the member can use the flexibility available under a SMSF to pay for increasing premiums. Purchase Information Can I increase my level of cover? You can increase the level of cover by request. The increase is subject to meeting our selected insurer’s medical and financial underwriting requirements. We will forward an application to you to complete the increase required. Usually there will be no additional policy fee at the next renewal date. Will I need a Medical Examination? Only if your personal health or pursuits require further examination or the amount of cover required exceeds our non-medical limits. Our medical requirements of our selected insurer are fully displayed on the Product Disclosure Statement. Access to this important document can be obtained by following the steps under the how to apply page of this website. Do not arrange a medical examination until after your application has been considered by our selected insurer. If required we will contact you and forward a Medical Examination Report for completion by you and your doctor. The cost of the medical examination will be paid by the insurer. Will I be required to provide financial information? Depending on the amount of cover required you may have to answer a financial questionnaire or supply an accountant's report. If required, a form will be forwarded to you. The questionnaire will be forward to you after your application has been considered by our selected insurer. Can I change cover from another insurer? Yes. You can apply to change cover by completing and signing an application. You should be careful to ensure that that any replacement cover is suitable for your needs and that you are aware of any qualifying period for some benefits. You should not cancel an existing policy until after your application has been accepted and you have received the replacement cover.
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