Don’t lose your insurance cover in the haste to rollover to a SMSF.

Just because you are unhappy with your superannuation investment results is no reason to put you or your family’s future at risk by losing your insurance cover in the process of changing.

don't lose your insurance in a rollover to SMSF

A good professional like an SMSF Specialist Advisor™ will always ensure you assess your insurance needs before withdrawing.

This issue is becoming even more relevant now that the new SMSF rules require Trustees to consider the member’s insurance needs regularly. See here for more detail.

Ok, so you have decided to start your own Self Managed Super Fund or move to one that you feel better meets your needs. That is fine, but one of the things you should look at doing is protecting any cover you have in your current fund by either keeping some money in your current fund to pay for ongoing insurance premiums or taking out replacement insurance cover in the name of your new SMSF. 

Why deal with insurance first?

  1. It may be too late once you have rolled your funds so you should assess your insurance needs before moving.
  2. Your existing fund may have been underwritten (priced and medically assessed) under Group terms which are more competitive and relaxed than stand alone policies. If you can keep a low balance in that fund to cover premiums you may save considerable money over time.
  3. Your health may have changed since you took out the cover and you may not be able to replace the insurance.
  4. You may now be self-employed or in a more dangerous occupation ( e.g. Miner) and may not be able to get cover for your new occupation or restricted cover. Some insurers restrict cover for those working from home under Income Protection policies.
  5. It may have been a number of years since you took out the cover and the rates for someone being re-underwritten at your current age may be considerably higher than those you receive because you have been an ongoing insured person.

So what can you do to maintain your Insurance cover when using a Self Managed Superannuation fund?

  1. Get a comparison quote for replacement cover in your new fund or through your SMSF. Get a quote for the 3 main covers Life, Total & Permanent Disability and Income Protection (often called Salary Continuance in Super funds)
  2. You could leave enough money in your current fund in a cash option to cover the next 3 years premiums. When you review your needs in later years you can either rollback some more funds to cover the insurances or seek alternative arrangements in the meantime.
  3. If you are moving to another fund then look for “Transfer Terms” where a new insurer may accept the transfer of the cover without going through the full underwriting process.

While you are doing a review you should take the time to consider options like Level Premiums, longer waiting periods, placing cover outside of Superannuation or splitting the cover.

Not sure why you need cover or what types of cover you need? Read our guide “How important is your peace of mind” and then contact us for a review of your options at our Castle Hill or Windsor Offices.

I hope this guidance  has been helpful and please take the time to comment. Feedback always appreciated. Please reblog, retweet, put on your Facebook page if you found information helpful.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

SMSF Specialist Adviser 

 Follow SMSFCoach on Twitter Liam Shorte on Linkedin NextGen Wealth on Facebook   

Verante Financial Planning

Tel: 02 98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

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  1. SMSF video coaching – What’s involved in setting up and running a SMSF | The SMSF Coach

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