Term Life Cover

Self ownership

Owning your life insurance in your own name means you pay the premium from your cash flow and the proceeds are paid to your nominated beneficiary or to your estate. Self ownership gives you control over the policy, the right to nominate who receives the proceeds and the right to cancel if the need arises. The premiums for self owned life insurance are not tax deductible and the benefits paid are tax-free. 

This may be suitable for those that have the cash flow available to pay the premium and you want to ensure the proceeds will be tax-free. 

Superannuation ownership

Alternatively, you can apply for cover within your superannuation fund. This allows the premium to be paid by making contributions to superannuation or simply be deducted from your superannuation account balance so it does not affect your cash flow. The premium is a tax deductible expense to your superannuation fund and can reduce the tax payable on contributions and investment income. The benefit to you will depend on your superannuation fund. 

In the event of your death, the insurance proceeds will be paid into your superannuation fund and form part of your account balance. The trustees of your fund will then pay a death benefit to your beneficiaries or estate. You may be able to make a binding nomination to ensure the trustees pay in accordance with your wishes. However, restrictions do apply as to who can be nominated as a beneficiary. Also, tax may be payable on the death benefit depending on how the benefit is paid (lump sum or pension), who the beneficiary is and the age of the beneficiary. This can make superannuation ownership a less tax-effective method of policy ownership. 

This may be suitable for you if you: 

• do not have the cash flow to make the premium payments 

• receive contributions from an employer into superannuation 

• are eligible to make salary sacrifice contributions 

• have a spouse on a low income or are eligible for co-contributions, or 

• are self-employed. 

Tax concessions can reduce the cost of insurance and may enable certain beneficiaries to receive all or some of the death benefit as a tax-effective income stream. If additional contributions are made into superannuation to cover premiums it is important to ensure you do not exceed the limits on how much can be contributed.

The total amount of superannuation monies used to start pensions will be capped at $2 million. A greater amount may be transferred where you have more than one beneficiary eligible to receive your benefit in the form of a pension. All superannuation income streams are assessed against the transfer balance cap regardless of when it first commenced.