You may have decided to make the move and roll your superannuation into an SMSF, but do you know how much life insurance you have just given up and left behind? More importantly, do you have any idea how much you really need?
A recent Rice Warner survey released in July 2011 indicates that Australians now have more insurance than before, the problem is though that we still only have around 39% of what we actually need.
Each year around 6,500 parents of working age die and in addition 17,000 find themselves unable to continue working due to illness, disability or injury. Yet most Australians are more likely to insure their home and their car? We are seeing a much higher level of insurance and this is largely due to the good work of superannuation funds. Most of the working age population (around 92%) have some form of life insurance, while 62% have some form of disability insurance. Most of this is arranged through "default insurance" inside your super fund. So if and when you move to an SMSF, are you replacing it?
Insurance needs vary significantly. A member of a family of 4 may require death and disability cover of an average of $720,000, but a member of a similar family of 4 with a high mortgage and higher income may need $2m death and disability. Importantly you need specialist advice. Most super funds offer insurance as a default and charge $1, $2 or more $'s per week. This unfortunately does not allow for high income earners and also has no correlation with the individuals personal family situation. A single person may only need a minimum of death cover to cover a funeral, but will need considerable disability cover and possibly trauma cover as well.
Our advice to you is to make sure when you think about moving into an SMSF, make sure that insurance is part of the advice discussion and get a professional opinion on what you need. Make sure you and your partner discuss this carefully and agree and what is required. There is no going back if you get it wrong.
