Insurance in Super

There has been a change to the Superannuation Regulations (SISR 1994), wherein SISR 4.09(2)(e) has been added which requires the trustees of an SMSF to consider whether any insurance cover should be retained, increased or taken out in the SMSF. As the requirement to consider the insurance needs of fund members will now essentially form part of an SMSF’s investment strategy, a trustee will need to consider whether insurance is required when developing a fund’s investment strategy, as well as during any regular review of the investment strategy. Some members may genuinely not need any cover due to high asset base and/or no gearing within the fund. Certain members may have enough cover outside of super and would not want to erode the contribution caps to fund insurance premiums. Others may be too old or uninsurable and therefore it may not be economical to obtain cover through the fund.

The critical point is that the trustees need to document the reason and evidence why the decision is made if there are no changes required to the insurance in the fund. It won’t be sufficient to simply state that the current arrangements are adequate. The purpose behind this decision should be documented and can be evidenced in the minutes of the meeting of the trustees.