Ignorance about life insurance is a massive problem in the self-managed super fund (SMSF) sector, with two-thirds of trustees unaware of recent legislative changes requiring that they consider this provision.
AIA Australia head of business development group insurance Craig Extrem said that the insurer's recent survey of more than 400 financial advisers showed 66 per cent of trustees were not educated about life insurance within SMSFs.
On August 14, amendments to the Superannuation Industry (Supervision) Act 1993, S4.09 (2) (d), required "trustees of self managed superannuation funds (SMSFs) to consider insurance for their members as part of the fund's investment strategy".
The next most prevalent reason, 22 per cent, for SMSF trustees not having such insurance within the fund was that it was held either in another super fund or privately.
Knowledge of how to apply for cover prevented 12 per cent of SMSF trustees from doing so, and cost prevented 7 per cent (some trustees had more than one reason for not having this insurance in the fund).
Extrem said life insurance premiums paid by an SMSF were about 20 per cent less that if an individual owned the policy.
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