How do I pay my insurance premiums if my SMSF owns the policies?

If you are holding a life insurance policy within your SMSF then the fund will be the legal owner of the policy. This means the premiums must be paid out of the money owned by the fund.

If your SMSF doesn’t receive regular investment income or employer contributions then you will need to make member contributions to put money into the fund, otherwise your investment balance will decrease. If your fund is investing in shares or property and doesn’t keep much cash, then you’ll need to set aside sufficient funds to pay your premiums. Remember that there may be caps on the amount of money you are allowed to contribute each year, so you may not be able to top up the fund to cover your premiums if you over-invest.

It’s essential that you ensure there is always enough money in the SMSF’s account to cover the premiums – if you fall behind with the payments your policy may be cancelled, leaving you with no insurance cover.