Establish, Protect, Grow Your Wealth

Life

Losing a loved one is one of the greatest hardships both emotionally and financially. Only 4% of Australian parents have enough life insurance to sustain their family’s lifestyle if either parent were to die*

Life insurance allows your beneficiaries to receive an agreed lump sum payment if the insured is to die during the term. Depending on the type of cover an additional payment can be granted if you suffer a terminal illness.

The amount of cover required will change during different life stages so it’s important to review your insurance at least every 12 months or at any life changing event (e.g. having children, receiving inheritance etc.).

Some important things to consider….

  • Life insurance premiums can be tax deductible if linked to a super fund.
  • There can be tax penalities if your death benefit is given to a non-dependant.
  • Do you have a non-lapsing binding death nomination in place if the policy is held in super?
  • If you policy is held outside of super, have you updated your will?

An EPG adviser can ensure these and other questions are answered and thus determine the appropriate level and type of life insurance to sustain your family’s lifestyle in the event of you or your partner’s death.

*Investment and Financial Services Association (IFSA)

Michael, aged 50, pays tax at the highest marginal rate of 46.5%.* He’s married with teenage children and needs life cover.

In the event of his death, Michael wants the insurance proceeds to be paid to his wife, so she can use the lump sum to pay off their debts and replace his income, should the unthinkable happen. The premium for the insurance is $2,140 pa.

If he takes out the Life Cover through a personal insurance policy (outside super), he will need to pay the annual premium from his after-tax salary. The pre-tax cost will therefore be $4,000 (i.e. $4,000 less tax at his marginal rate of 46.5%* is $2,140).

After speaking to his adviser, Michael decides to take out an equivalent level of cover through his super fund. He arranges for his employer to sacrifice $2,140 of his pre-tax salary into his fund and instructs the fund administrator to use this contribution to pay for the insurance premiums.

Because super funds receive a tax deduction for insurance premiums, no contributions tax will be deducted from Michael’s super contribution. As a result, he will be able to purchase the insurance through his super fund with pre-tax dollars and make a pre-tax saving^ of $1,860 on the first year’s premiums.

*Includes a Medicare Levy of 1.5%
^Given Michael pays tax at a marginal rate of 46.5%, the after-tax saving would be $995
Note: Tax would be payable on the insurance proceeds if received by a non-dependent. This case study is for illustrative purposes only.
Purchase Life Cover cost effectively: 64529M0708

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