Life Insurance Ownership and Rights to Benefits

Once the coverage levels and types of policies have been determined, the property and payment of the policy must be considered. There are three main ways of owning a life insurance policy; personally (including ownership), in a pension fund and through a legal entity (ef corporation or trust). Not take care of business property in this article due to the complex nature of this style of property.

Before discussing the options of properties, primarily the context of the property will be mapped out as far as contacts Insurance Act of 1984. A policy can generally be owned by individuals or legal entities on the life of another person and the insurance contract between the policy owner and the independent life. This is a common misconception, the policy owner, not the life assured to see what criteria. The law states that any entitlement to a benefit falls in the following order;

1) The policy of the landlord

2) Beneficiary

3) Real Estate

This only applies to life insurance policies where the beneficiaries may be appointed. To experience the social security policies (total and permanent disability, trauma and income protection) to cover staff, is generally the case that the policy owner's life insurance policies in which are not held in retirement.

What does this mean for the payment of claims? In any situation complaint, the company will pay benefits for life in the first place the person who owns the policy that is the legal owner of the policy, if that person is unable to accept payments due to death, the life insurance company will try to correspond to the listed beneficiary. Again, if no beneficiary is listed, then the life company will pay benefits to the estate of the insured person.

A single criterion of personal property is one of the most common methods of owning a policy. In this scenario, the insured's life usually the very policy for which they are insured. Should not necessarily be the debtor of politics, but who control its policy. From the fiscal point of view, self-ownership is usually the most efficient method of disability as a policy owned by a third party on someone else's life can trigger an event of capital gains upon request. From the standpoint of administration, this is the structure of properties more flexible. In possession of a policy of yourself, you are able to make changes to the policy without hindrance.

Policies of life insurance can also be owned by multiple persons (eg, husband and wife). Even if it is perceived to give more control and safety performance of a complaint, can generally complicating the management policy as both signatures are required for the administration policy. From the point of view of succession planning, in case of partnership or marriage breakdown, while the policy is in force, you can force a contractor to request a new policy because the parties can not agree on changes to the policy (for example, to change beneficiaries ). If a person is no longer insurable due to a change in medical circumstances, this could leave people without coverage in case of need the most. In considering the policies of the common property, estate planning requirements must be considered to ensure that the right of ownership structure of politics, as the ownership structure wrong, it may prevent the intended beneficiaries of a policy benefit.


Superannuation is the second method to ensure personally. Most pension funds offer some form of insurance, from per-determined policies to full access to customized offers retail insurance. Each pension fund vary in their offer, and most offer a variety of different insurance options, so the extent of cover that can be achieved must be considered when opting for a particular pension fund.

And 'possible to hold Life Insurance, the shape of the' any occupation 'TPD and income protection cover in detail the pension funds. Self-managed pension funds have greater flexibility regarding the types of policies that can be coated inside and can hold its own policy of employment or TPD cover trauma. However SMSF to consider these policies must ensure that they do not breach the sole purpose test and the need to consider the definition of policies to combat the conditions of issue and implications of the law of taxation.

Holding insurance to pension funds offers a number of advantages. First, the awards are funded by the pension budgets. This can allow a person to ensure an appropriate way without straining cash flow. This may be more suitable for young families where the need is great for coverage and cash flow-limited. Moreover, taking life insurance inside a room pension funds, the premiums can be paid through tax deductible contributions, both from an employer or through salary sacrifice / self-employed contributions. The Government co-contribution can be used to help pay insurance premiums based pension!

Ensuring via superannuation consolidates the creation of wealth with the protection of wealth within an account of the structure. As superannuation generally keeps a balance, the possibility of a policy of being forgotten or lapse due to non-payment is reduced considerably. This ensures continuity of coverage.

There are downsides, however, to ensure through superannuation. Death is not paid to employees and all disability payments attract a tax liability. If this is not considered in the application and levels adjusted accordingly, or you can leave your beneficiaries or the life insured (for an event of total and permanent disability) without sufficient capital to meet their needs. Sales are also influenced by pension insurance premiums. Every dollar paid to a pension account for insurance, is deflected by a dollar for investment purposes and, cerise caribous, will result in a lower balance of retirement. As such it is generally recommended for increases in pension fund contributions to offset this impact. Although this is not always practical or possible to contribute more, the impact of insurance premiums on insurance should be considered when deciding to secure through retirement.

Claim benefits payable also operate a little differently, where the insurance on retirement. All proceeds of protest against the pension fund, being the owner of the policy. It is then up to the trustee of the pension fund to release payments to both the life of the insured or the beneficiary's account.

Even if a person can meet the requirements to claim a benefit with regard to a policy of total and permanent disability, the person must also meet the requirements of the trustee so that the funds to be released from the pension account. Usually these requirements are aligned, but there may be circumstances in which a person may be eligible for credit, but not for the release of payment from the pension fund. This is particularly true for SMSF and may be the case in which you play the retail policies in a pension fund.

Proceeds of life insurance are also treated differently. Investors typically have the opportunity to nominate a beneficiary of a pension account to receive death benefits, much like a policy of personal property, but the strength of this appointment varies.

There are two types of applications within superannuation beneficiaries, binding and non binding. The beneficiary of association creates an obligation for the pension fund to pay benefits to the person named. This type of application normally expires every three years, but it is becoming increasingly common for funds to provide non-binding nominations canceled.

The second, a non-binding nomination is basically giving the pension fund a 'preference' for those who want benefits paid. The trustees of the pension fund is worth exploring the option of paying the proceeds to choose from. This can have disastrous consequences if more than one person claims the benefit of the fund and the fund must determine what the money should be paid in accordance with relevant legislation and the deed of trust fund. There were a number of cases in which the proceeds were paid to unintended beneficiaries.

It should be noted that, as mentioned, the insurance deals vary significantly within the pension funds, even within a single range. It 'important that, if the insurance through pension funds, a fund is selected that provides appropriate types of insurance, the Fund may leave a wrong person insured incorrectly, or not insured at all!

Once the levels and types of coverage were determined ownership of the policy is of vital importance when considering how to keep and pay for the policy. Property improper or incorrect use can cause either an unexpected tax liabilities or the proceeds of a request to the wrong person.

The information provided in this article are general in nature. Before acting on information provided in this article you should consider whether it is appropriate for your circumstances, needs and goals. It is advisable to request specific personal financial advice on the adequacy of the information contained in this article before proceeding. You should also obtain and consider a Product Disclosure Statement (PDS) before making any decision to purchase a product.

Unsure if you have structured your policy properly? Want to ensure your intended recipient receives the benefit? Contact Ben at PRIMORIS Financial today!

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