Superlink Your Income Protection Insurance

If you’re wondering how you can pay your premiums through your super, without compromising on value, you might want to consider splitting your income protection.

Superlink income protection, also called flexilink or split income protection insurance, allows you to have insurance across the superannuation and non-superannuation environment. Splitting your income protection ownership will generally enable you to maintain access to the benefits usually not available on income protection that’s entirely held inside super.

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What is super linking?

Super linking your income protection means you split the ownership structure of your insurance between your superfund and yourself. You are thus, connecting the income protection cover you hold personally to the cover held within your superannuation. With flexi-linking, you can fund part of your premiums through superannuation and access the benefits that are available outside of super.

Please ensure you understand the pros and cons of an income protection policy held through super.

How does split income protection work?

When splitting your income protection (IP), you’ll have two policies. One, personally owned (you control the policy) and the other is owned by the trustee of your super fund, on your behalf (they control the policy). Together, these linked policies generally pay up to 75% of your income when you’re unable to work, for longer than your waiting period, due to an accident or sickness.

Important: If you cancel one of the policies or forget to make payments and it lapses, both will cancel.

The diagram below is a visual representation of how a super linked IP policy can be structured. Take note of how the income protection held inside super benefits works in conjunction with the benefits of an income protection policy held outside of your super fund.

Income protection insurance inside and outside super

Benefits of split ownership of income protection policy

When income protection insurance is super-linked, it generally allows you to hold more comprehensive coverage more cost-effectively:

  • Less out-of-pocket costs: Have part of your premiums paid from your superannuation contributions. However, it is essential to note that this can potentially decrease your retirement savings.
  • You are generally entitled to tax deductions for the part of your income protection premiums held inside superannuation.
  • Access additional features: Splitting income protection provides you with enhanced cover and ancillary benefits not available to policies held inside super.
  • Different premium frequencies: You might be able to pay monthly premiums for insurance help inside superannuation and pay annual premiums for the costs of cover held outside

How to claim on flexilink insurance?

When claiming income protection under the two split policies at the same time, claims will generally get assessed under the super policy first. Because your super fund is the owner of your policy, the proceeds from a claim will be paid out to your super fund. To access the benefit, you will need to satisfy a condition of release as defined in the Superannuation Industry Supervision Act.

Any remaining benefits not payable under your superannuation is then typically paid under the policy that you have outside of super. However, if your fund trustee did not accept your claim, the benefit could be paid directly to you via the non-superannuation policy component.

Take note: Any claim paid under your super linked policy will generally reduce the linked cover by the amount paid out.

Published: August 16, 2019

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