Life insurance

 

Life insurance, also referred to as term insurance and death cover, pays a lump sum if you die. It protects your family if you are no longer around to support them. 

 

While most people think that life insurance is only for the main income earner, the person who takes care of the family is also a large contributor to the home.

 

Can be purchased either inside or outside of superannuation

Outside super

 

  • Life insurance premiums are generally not tax deductible, however the benefit payment is tax-free.

 

Inside super

 

  • Premiums are tax deductible for the super fund, but the benefit payment may be taxed depending on who receives it.
     

Provides a cash lump sum that can be used by your family to:
  • Cover costs such as funeral expenses and legal fees associated with the implementation of your Will.
     

  • Repay debts such as your home mortgage and personal loans.
     

  • Replace your income.  The lump sum can be invested and withdrawn as income.
     

Many super funds provide life insurance.  Your employer has an obligation to offer you a super fund that provides a minimum level of death cover.  You can choose to maintain this cover, increase it or opt out.

 

Contact your super fund to check whether you have any insurance and whether it’s enough to meet the needs of you and your family.  Your super member statement will also show whether you have any insurance cover and how much the premiums are.
 

Tax treatment

How much life cover should I have?

 

This will depend on the costs you want to cover, such as:

 

  • Funeral costs;

  • Living expenses for your family;

  • Debts to pay out, or ongoing loan repayments ;

  • Future education expenses.

 

You should also consider:

 

  • Whether your spouse will continue to work.

  • Funding the cost of a house keeper, childcare or a nanny.

  • Whether any assets will be sold, such as your car.

  • Whether you will downsize the family home.

 

We can help you work out an appropriate level of life cover to suit your needs.
 

© 2016 Prospaerum Pty Ltd

Prospaerum Pty Ltd, trading as Prospaerum Financial Planning

Corporate Authorised Representative of Charter Financial Planning Limited

 

Australian Financial Services Licensee
Licence Number 234665

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