It is always a smart strategy to protect your
family's lifestyle with life insurance. But it is even smarter
if you can get the structure right for your
When you take out life insurance, it is an investment for your
future. With that cover in place, you know that if you ever
experience a serious accident or illness, you have financial
support to help pay your medical bills and maintain your lifestyle.
Compared to the premiums you pay, the benefits you can receive from
life insurance can be life-changing. However, there is a way to
make these premiums work even better, and it largely comes down to
the way you structure the ownership of your cover.
How do you hold your life insurance?
Let's look at the most common types of life insurance: Term
Life, Income Protection, Living/Trauma Insurance, and Total and
Permanent Disablement (TPD) Insurance. They each provide a
different type of protection, so you could potentially need all of
them in your financial plan. But that doesn't mean you need to
hold them all in the same way. Take Term Life insurance (or
'death cover') as an example. It is one of the most common
types of life insurance because it can help eliminate your debts
and provide an ongoing income for your dependants in the
unfortunate event of a death. Outside super, Term Life premiums are
not tax-deductible to you personally. But inside super, your
premiums are generally taxdeductible to your super fund which may
reduce the tax deducted from your benefits.
How will your benefits be taxed?
The best structure for your insurance is not all about making
your premiums more tax-effective. You also need to think about how
benefits will be taxed. For example, Term Life benefits paid out of
superannuation are tax-free if they are paid to a spouse, a child
under 18 or a financial dependant. However, if anyone else receives
them – such as an adult child or relative – the person
may have to pay tax. By contrast, if you hold Term Life cover
outside super, anyone could receive the proceeds tax-free.
Is your insurance plan up-to-date?
Your insurance needs can change over time, so you should talk to
your financial adviser to make sure you have adequate life
insurance cover, and that it is structured in the best way for your
Could your Term Life benefit cover your mortgage?
Many people may have some Term Life insurance provided by their
employer. But have you checked how much you are insured for, and
whether it would be enough to cover your mortgage and other
financial responsibilities? The level of cover is often a minimum
amount based on your age and/or income, and it generally
doesn't take into account your debts or dependants. While some
insurance cover is always better than none, the best way to get the
cover you need is to get a personal insurance assessment from your
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Contractors and principals should ensure they have appropriate insurance coverage instead of relying on indemnity clauses.
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