SMSF Insurance Cover
Protect your self-managed super fund with the right Life, TPD, Income Protection and Trauma cover — and understand exactly what your options are as an SMSF trustee.
Insurance in Your SMSF — Things to Consider
Setting up an SMSF comes with many benefits and some important risks. As property is considered an illiquid investment, holding life insurance inside your SMSF is an effective way to manage debt risk — particularly if you've borrowed to buy a property through an LRBA.
In the event something happens to one of the fund members, life cover held within the SMSF can be released to the fund to pay down debt, continue contributions, or be distributed to beneficiaries as a death benefit.
The key decision for new SMSF trustees is whether to maintain insurance held in a retail or industry fund — or apply for new cover through the SMSF directly. Each option has different tax, cost and access implications.
Premiums paid by the SMSF are tax-deductible at the fund's 15% tax rate
Life and TPD cover can be held in an SMSF — income protection generally cannot
Always seek advice from a licensed financial adviser before making changes to cover
Quick Guide: SMSF Insurance
SMSF Insurance — Our Video Guide
Everything you need to know about managing Life and TPD insurance inside your self-managed super fund
How to Get SMSF Insurance
There are three main ways Australians source their SMSF insurance — each with different trade-offs
Direct — TV Advertised
- No medical check — often means limited cover
- Expensive relative to underwritten policies
- Many complaints around claims payout
- Not tailored for SMSF trustees
My SMSF Property
- General insurance information and guidance
- Referral to a licensed financial adviser
- SMSF-specific context and compliance support
- We understand your fund's structure and needs
Online Comparison
- Compares price & providers quickly
- Premiums get expensive over time
- Little to no personalised service
- Limited advice — not SMSF-specific
Types of SMSF Insurance Cover
Understanding what each type of cover does — and whether it can be held inside your SMSF
Life Insurance
✓ Can hold in SMSFLife insurance pays a lump sum on the death of the insured member. Within an SMSF, this benefit is distributed as a death benefit to nominated beneficiaries — typically the surviving spouse, dependants or the estate.
Holding life cover inside your SMSF is particularly valuable when the fund holds a property loan (LRBA), as the payout can be used to clear the debt without requiring the forced sale of the property.
TPD Cover
✓ Can hold in SMSFTotal and Permanent Disability (TPD) insurance pays a lump sum if a member can no longer work due to illness or serious injury. Within an SMSF, a TPD claim can generally be released as a condition of release is met — permanent incapacity.
Two definitions apply: Own Occupation (unable to work in your specific profession) and Any Occupation (unable to work in any job). Own occupation is more favourable but must be held outside super.
Income Protection
⚠ Not recommended in SMSFIncome protection covers up to 75% of your gross salary if you're temporarily unable to work due to illness or injury. While it can technically be held in super, it is generally not recommended inside an SMSF.
The problem: a condition of release (such as reaching preservation age 55–65) must be met before the money can be accessed. In most cases, income protection benefits cannot be accessed when they're needed most. Holding it personally means premiums are 100% tax-deductible at your marginal rate — often more advantageous.
Trauma Cover
✗ Cannot hold in SMSFTrauma insurance (also called critical illness cover) pays a lump sum upon diagnosis of a specified serious condition — such as cancer, heart attack, stroke or organ failure. It provides financial support during recovery when you may still be alive but unable to work.
Under Australian superannuation law, trauma insurance cannot be held within an SMSF or any superannuation fund. It must be held and paid for personally. Premiums are not tax-deductible when held personally.
SMSF Insurance Comparison
Quick reference for what can and can't be held in your SMSF
| Cover Type | Held in SMSF? | Tax Deductible in SMSF? | Accessed When? | Best Practice |
|---|---|---|---|---|
| Life Insurance | ✓ Yes | ✓ Yes — 15% | On death of member | Recommended in SMSF, especially with LRBA loan |
| TPD (Any Occupation) | ✓ Yes | ✓ Yes — 15% | Permanent incapacity | Suitable in SMSF; consider definition carefully |
| TPD (Own Occupation) | ✗ No | N/A | Permanent incapacity | Must be held personally; marginal rate deduction |
| Income Protection | ⚠ Possible but not advised | ⚠ Yes, but access issues | Condition of release | Better held personally — 100% tax deductible |
| Trauma / Critical Illness | ✗ Prohibited by law | ✗ No | On diagnosis | Must be held personally |
SMSF Insurance FAQs
Protect Your SMSF with the Right Cover
Our team can help you understand your insurance options and connect you with a licensed financial adviser who specialises in SMSF insurance. Don't leave your fund exposed.
Disclaimer: All information on this page is intended for general educational purposes only. My SMSF Property does not provide personal financial, legal or insurance advice. The information has not considered your personal and financial objectives. You should seek advice from a licensed financial adviser and read all relevant product disclosure statements before making any insurance decisions. R S Capital Partners Pty Ltd A.B.N: 67 145 282 908 trades as My SMSF / My SMSF Property.