Australians have the option of funding life insurance through their superannuation, offering unique benefits and some potential downsides. Here’s a look at the pros and cons to help you decide if this approach suits your needs.
1. Pro: Tax-Effective Premium Payments
Life insurance premiums paid through super are generally tax-deductible to the super fund, making it a tax-effective way to cover insurance costs.
2. Con: Limited Coverage Options
Some cover like critical illness, (trauma cover), cannot be paid by your super fund.
3. Pro: Reduces Personal Cash Flow Impact
Paying premiums through super reduces out-of-pocket expenses, freeing up cash flow for other financial needs.
4. Con: Potential Impact on Retirement Savings
Using super to pay premiums can erode retirement savings over time, which may impact future financial security.
While paying life insurance premiums through super offers convenience, it’s essential to weigh the benefits against potential downsides.
Comments