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.  (more…)

Think twice before cancelling insurances as you get older.


Do you know that the average person cancels their personal insurance about 1-2 years before an claimable illness strikes! The average age a person discontinues one or more of three types of living insurance policies – cover for disability, critical illness/trauma and income protection – is 45 years yet the average age for a claim is 46.5 years. (source TAL)

As mentioned in a previous blog the SMSF regulations now require Self Managed Superannuation Fund Trustees to consider Insurance as part of the SMSF Investment Strategy . TheRisk Management following applies to everyone regardless of the type of investor you are or the structure you use to save for retirement.

I see many clients in our Castle Hill and Windsor offices in their late 50’s who have cancelled their life and income protection insurances before they have come to see me. Usually they say it is because they have paid off their mortgage and are debt free so they didn’t feel they needed cover any longer.

Their focus now was on expense reduction and saving via salary sacrifice to superannuation and even some after tax contributions from savings.

While it is great to see them focus on saving for retirement and budgeting, what they don’t realise is that in cancelling insurances it is their retirement lifestyle or that of their spouse they are no longer insuring and not just their current needs.

With 5-15 years of focused savings towards a retirement nest egg they can substantially improve their lifestyle after retirement. However those dreams of a happy retirement can all be taken away with a diagnosis of cancer or a stroke that inhibits them working for a prolonged period.

You don’t just find yourself financing time off work and medical expenses but also lose out on the employer super contributions and salary sacrifice as well or worse for a small business owner, you face the expense of a getting someone to cover for you to keep the business afloat.

To realistically assess if you need to maintain your Life, Trauma or Income Protection insurance, you need to think through the worst-case scenario. If you were unable to work for 3 years due to an illness today, how would you and your loved ones cope financially?

  • Would you be able to meet ongoing living expenses like food, clothing, changing the car, pay for private health insurance premiums, etc? (this assumes mortgage paid off)
  • Would you have the liquid funds to cover additional expenses or loss in income (e.g., gap in your medical fees, time off work for your spouse to take care of you,
  • What would happen to your retirement plans and would you be able to save enough money to see the kids through the final college years or fund your retirement comfortably?
  • What if you were actually permanently disabled and they had all the costs of rearranging the home, medical care and transport options for you.

In all honesty, it is always a struggle when you lose your earning capacity. The last thing you need compounding the situation are financial concerns. Insurance helps make sure that you and the people you care about will be provided for financially, even if you’re not around to care for them yourself.

So whether you’re in retail, industry or a Self Managed Super Fund, take a moment to consider how insurance might fit into your retirement plans. We can look at ways to reduce the cover and costs to keep them affordable and provide that protection for you and your family.

If you think you may need to review your Insurances then you can contact us to offer you advice on your options. As well as offering advice on Insurances, Superannuation and SMSF’s our advisers can also offer you help in many other area’s you may be experiencing problems such as:

  • Financial Planning,
  • Tax Planning,
  • Debt Consolidation,
  • Investment Portfolios,
  • Estate Planning,
  • SMSF Trustee queries.

Have you found this blog helpful? Pass it on. Social media buttons beneath the article.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

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 Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557

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.

Self Managed Super Funds must include an Insurance Needs Analysis as part of the fund’s SMSF Investment Strategy.


Amendments to the SIS Regulations in place from August 2012 require trustees of SMSFs by law:

  1.  to consider whether insurance cover should be held by the fund on the lives of the members;
  2. to review that decision as SMSF trustees regularly as part of the review the investment strategy of the fund.

The obligation (which is set out in SIS Reg 4.09(2)(e)) requires the trustees to apply their minds to whether  “for a self managed superannuation fund – whether the trustees of the fund should hold a contract of insurance that provides insurance cover for one or more members of the fund.”

This is a major step up in terms of duties from the old regulations and I believe has been prompted by the June 2010 Super System Review Panel report noting that less than 13% of SMSFs have insurance. Now in reality the major factor to consider is probably that this low figure is a result of most SMSF members being over 55 with higher super balances and low personal debt so the need for any insurance may be negligible.

Insurance protection

Image courtesy of iosphere at FreeDigitalPhotos.net

So what insurance covers are we talking about?  Well it is not simply life insurance, and could include total permanent disability cover and income protection cover that insurers make available via superannuation.

This is not an obligation on the fund to take out each of these insurance covers – the trustees must merely consider the issue.

To prove for the purpose of the annual audit that the trustees have considered the issue, the trustees will have to prepare minutes/resolutions which:

  • acknowledges that the trustees are aware of the obligation to consider insurance cover;
  • shows that the trustees have considered the need for insurance cover for each of the members of the fund;
  • documents that they have implemented cover where possible to meet those needs of the individual members and of the fund itself (in the case of LRBA) or
  • acknowledges that the trustees have determined that insurance is or is not required for a particular member(s)

As is the case with many clients that I take care of the trustees may conclude that no insurance cover is required in respect of a particular member for a variety of reasons such as:

  • when the member has indicated that they have no need for cover as their debts are low and needs are fully funded;
  • the member has sufficient insurance cover in other super funds (we often keep employer or industry funds open to avail of lower group rates);
  • the member has other insurance arrangements outside of the super;
  • that due to illness or injury the cost of premium is too high for the cover provided;
  • when the member has actually been declined for cover due to occupation or pre-existing conditions;
  • that the member does not believe in insurance or is unwilling to pay the cost of the premium.

So how far do you go as a Trustee in documenting your reasons for their decision? Is a full-blown explanation required or a simple statement that they have considered the issue and have come to a set conclusion either way for each member?

Whilst going into detail may sound the correct option to show the trustees have fully discharged their duty, those reasons set down in writing could be questioned later and the process found negligent which may expose the trustees to claims that they have breached their duties.  You may think that an SMSF most often consisting of mum and dad and maybe a few children in a family group like this may be unlikely to end in conflict but potential Beneficiaries of Estates, with the advantage of perfect hindsight, may seek redress to put pressure on trustees to consider their claims.

A possible solution may be for the trustees to discharge their duty by requesting from each member to indicate whether the member wishes to have cover for any or all risks identified in the fund.  If a member said that they do not wish to have or do not need, and will not submit to any underwriting requirements, then the trustees would be in a position to claim that they either have discharged their duty to the member.

As the new requirement has been attached to the investment strategy operating standard of SIS Reg 4.09, it seems that the trustees will also have to reconsider the issue of insurance each time the investment strategy is reviewed and on the occurrence of any significant change to the circumstances of a member or the fund such as a large contribution or withdrawal.

It is time to decide how you will comply with the new rules so please contact us if you need assistance or want to explore your options. Our risk specialists can review existing insurances and provide quotes on a range of covers from suitable insurance companies.

Want to do some preliminary investigations yourself? Why not try this decent Insurance Needs Calculator by clicking here, and then make an appointment to discuss the results with us.

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 etc to make sure Trustees are aware of the changes.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

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 Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557

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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