Insurance, Investments

Insurance key part of investment strategy

SMSF insurance strategy

SMSF trustees must remember the provision of insurance via their fund is covered by the investment strategy and must carry appropriate reasoning.

SMSF members securing life insurance cover through their fund have been warned to ensure it aligns with their investment strategy and has an appropriate reason for its inclusion within the fund.

Smarter SMSF chief executive Aaron Dunn said treatment of life insurance within an SMSF was covered by Superannuation Industry (Supervision) Regulations and had been there since 2012 following the Super System Review of 2009.

“The Super System Review imposed an additional obligation into the investment strategy requirement for an SMSF and it relates to the decision about whether the trustees of the fund should hold a contract of insurance that provides insurance cover for one or more members of the fund,” Dunn said during a recent webinar.

“This is not a compulsory requirement to actually have insurance, but there is a conscious decision of consideration of one of more members to hold that insurance.”

He said SMSF investment strategies now require particular evidence, which can be impacted by whether the trustee has considered insurance and what was taken into consideration when deciding to provide cover.

This consideration could include “what policy has been held for a particular member, or alternatively where the trustee has considered insurance and there may be insurance outside of the SMSF, or they are satisfied the members are at a stage of life where insurance is not required or would be inappropriate”, he said.

“It is important that you are looking at insurance and giving it consideration as required because it is quite clearly forming part of the investment strategy rules going forward, and it’s not just initially setting that up as it does form part of the regular review function of an investment strategy each and every year as well,” he noted.

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