Does your SMSF need to take out life insurance?

Regulation 4.09 of the Superannuation Industry (Supervision) Regulations 1994 is part of the operating standards that apply to self-managed superannuation.

The regulation requires (among other things) that the trustee of the fund must:

• formulate
• review regularly; and
• give effect to

an investment strategy that has regard to whether the trustee should hold a contract of insurance that provides insurance cover for one or more members of the fund.

In considering whether to take out life and or TPD insurance for a member a trustee would do well to consider:

• the member’s total super balance
• any existing insurance arrangements both inside and outside of superannuation
• the age and health of the individual member
• the income, assets and liabilities of the individual member
• the impact of death or disability on members or beneficiaries’ standard of living
• the member’s intentions in relation to their death benefits
• the nomination of the beneficiary/s of the policy
• the taxation of benefits
• the conditions of release
• the cost and affordability of cover taking into account the member’s age and retirement goals, and
• the deductability of insurance premiums.

Townsends Lawyers offers pro forma documents to record a fund’s investment strategy and provides compliance assurance for the trustees and the fund:  Visit www.townsendslaw.com.au/online-products/category/smsf