SMSF Service Provider Awards: Life insurance
Regulations were introduced in 2012 making it mandatory for SMSFs to consider the life insurance needs of their members. It’s a welcome step forward, according to TAL, winner in the life insurance category in the CoreData SMSF Awards.
TAL head of market development David Denison says SMSFs have a low level of awareness of their insurance needs and making it compulsory for them to consider cover goes at least part way to addressing the issue of underinsurance.
Insurance is highly relevant to SMSFs, particularly to those that are looking to invest in property through limited recourse borrowing arrangements, Denison says.
“An SMSF may be forced to sell its investment property to make a beneficiary payment should one of the fund members die if no other assets, such as insurance payouts, are available to make the payment. If that were to happen, the fund would lose the tax benefits of setting up the arrangement,” he says.
Many SMSFs will have no trouble accessing cover for their members. But some people who have had previous medical conditions may find it difficult or costly to obtain a new policy in their SMSF, even if they have existing cover outside of super or through a pooled superannuation fund. Some SMSFs that were set up without insurance advice find that their members lose access to cover after their previous superannuation fund has been closed, Denison says.
“Some members get around that problem by maintaining a small balance in a pooled super fund, but it’s a hassle for the trustees to remember to keep putting money into the fund to pay for premiums,” he says.
“We see that as a big opportunity to help people. We believe that trustees are increasingly looking for an easy and hassle-free way of moving existing insurance into their self-managed funds.”
TAL will shortly bring to market what it calls accelerated transfer terms, short-form underwriting that will allow people to move existing cover into a retail environment from the group policy it would have been under in a retail or industry superannuation fund.
The life insurer seeks to set itself apart from its competitors, not only by offering innovative life products and solutions, but also by regularly running master classes for advisers and accountants who work with SMSFs. The master classes outline the legal and tax requirements of setting up the appropriate insurance within SMSFs. “We want to be known as the life insurance advisers to the SMSF adviser,” Denison says.
More SMSF Service Provider Award winners
- Perpetual: Australian share fund
- PIMCO: Fixed income
- BGL: SMSF accounting software/administration
- Magellan: International shares
- Macquarie Adviser Services: Cash and accounting
- Colonial First State: Investment platforms
- Multiport: SMSF administration
- ING Direct: Term deposits
- AMP Capital: Commercial property
- AMP Bank: SMSF term deposits
- NAB: SMSF property loans