A gap in employment can reduce an income protection payment to zero if the policy is held within an SMSF at time of claim, an insurance expert has warned.

The proceeds of a successful temporary incapacity insurance claim cannot automatically be passed on in its entirety to the insured SMSF member.

Advisers with SMSF clients should review their professional indemnity cover to determine if there are any policy restrictions regarding those services.

Best SMSF practice would suggest trustees not rely only on the SIS Regulations to justify releasing member benefits as a result of incapacity.

The decision to hold risk insurance inside an SMSF must be determined by more than just the tax deductibility of the premium payments.

Trustees should seek strong medical evidence a member is incapacitated before allowing them to access benefits.

Rolling money from one super fund to pay insurance premiums in another will reduce the the level of tax deductions available for personal contributions.

SMSFs claiming a future service deduction on life insurance benefits should make premium payments regularly to ensure the deduction remains available.