Insurance and self-managed super: don’t get caught out!

Insurance SMSFSelf-managed super funds are now the fastest growing part of the superannuation market in Australia, with more than one million of us being members of an SMSF. (Source: SMSF​ Association)

SMSFs have become a popular way for Australians to build their retirement savings because they generally offer greater control and flexibility of your super investments.

And while thousands of new self-managed funds are being established every year, there are some technical areas that can ‘trip up’ the average SMSF super member.

According to Robert Bauman* of Straight Money Talk P/L, insurance can be one of the trickier aspects of SMSFs that members need to be aware of.

“As seems to happen regularly with superannuation laws, legislation changes can and do affect what people can and can’t do with their super savings.

“New insurance policy regulations were introduced in July 2014 to ensure greater consistency between SMSFs and regular super funds,” says Robert Bauman.

“It’s now a little clearer as to what types of insurance can and can’t be purchased by SMSFs.”


Allowed within SMSFs Not allowed within SMSFs
Life insurance TPD – ‘own occupation’
TPD – ‘any occupation’ Trauma cover
Standard income protection Comprehensive income protection


And while Life, TPD (Any Occupation) and Standard Income Protection policies can be purchased by SMSFs as shown in the table, Robert Bauman warns that this cover will have some restrictions compared to the same cover purchased outside super.

In the case of life insurance, for example, payouts from SMSFs can be subject to tax under certain circumstances, unlike policies outside super where payouts are generally tax-free.

“Insurance within SMSFs can be complicated where exceptions exist, so it’s worth exploring your personal situation with a financial adviser,” he says.

We are ready to help. We are equipped with the knowledge and expertise to help you get the most out of your SMSF, by showing you how to set up and develop a sound investment strategy that reflects your needs. Contact our Straight Money Talk office today on 1300 416 590, or you can send an email to

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*Robert Bauman is an Authorised Representative. This editorial is current as at July 2015.

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