Super-link Insurance Inside and Outside Super

Inside Super

When you purchase insurance through your superannuation, the fund becomes the policy owner. You need to meet both the SIS conditions of release and policy definitions before accessing an insurance payout. Own occupation TPD and Trauma Insurance are not available through super. However, it’s important to note that your retirement funds will decrease if you pay for your insurance through your super.

Outside Super

If you purchase insurance outside the superannuation environment, you are typically the policy owner and pay the premiums from your own pocket. Policies outside of super generally have a more straightforward claim process.

How does super-linking work?

With super-linking, you split the ownership of your policies between the superannuation and non-superannuation environments. This makes it possible for you too, for example, link Trauma Insurance, held outside of super, with a death benefit and Any occupation TPD held inside your super fund.

Pros and cons of super-linking

Why would I super-link my policies?

Super-linking your policies is a way to have a combined style policy with part of it funded by your superannuation monies, which can have several benefits. Firstly, it can be a more cost-effective way to obtain insurance as premiums are paid from your super fund  rather than your cash flow. Secondly the portion paid by your super fund is tax deductible to your super fund.

Additionally, by super-linking your policies, you may access additional features and benefits that are not available through standalone policies or your superannuation fund alone. Finally, super-linking can give you greater flexibility to choose what types of cover you want to hold in different environments.

Which life insurance policy types can you super-link?

You can generally have Super-link TPD Insurance and trauma cover. The concept of super-linking income protection is where you split the ownership of your policy between self-owned and super-owned.

Example of the impact of a full trauma insurance claim in a super-linked policy

The insured individual has three types of cover across 2 policies to provide financial protection in the event of death, total and permanent disability (TPD), or trauma. The policy details are as follows:

Assuming the insured individual suffers from a trauma event and makes a full trauma insurance claim, the payout amount would be $200,000, which is the cover provided by Policy 23. As a result of the claim, the remaining trauma cover amount for Policy 23 would be reduced to $0. The remaining cover amounts for Policies 1 and 2 would be reduced by the amount paid out by the full trauma insurance payoutpolicy. Therefore, after the full trauma insurance claim, the remaining cover amounts for the policies would be:

It’s important to note that the insured individual would still be covered for TPD and life insurance events if they meet the policy’s terms and conditions.

Factors to consider when super-linking insurance

Super-linking refers to linking the personally owned Trauma, or TPD Cover  to a primary benefit policy eg: life cover policy owned by a super fund. This can provide a range of benefits, such as helping with your cash flow as part of your premiums are paid for by your super monies, secondly it can be alot more affordable compared to standalone policies.

However, there are several factors to consider when super-linking insurance, including:

Overall, it’s important to carefully consider the benefits and drawbacks of super-linking insurance before making a decision. It may be beneficial for some individuals, but not for others, depending on their personal requirements.