What happens if I need to make a claim on my SMSF life insurance?

As the legal owner of the policy, the Trustee of your SMSF will have to make the claim on your behalf. If the claim is successful the insurance company will pay the money into the account of the SMSF, and the money will belong to the fund.

The fund will only be allowed to transfer the money to you or your family if you meet one of the release conditions set by the Australian Tax Office. These conditions may be similar to those of the insurance company when you make a claim – but this may not always be the case.

To release your benefits your SMSF will have to consider your case and make a documented decision to pass on the money. Even in straightforward situations this could delay your access to the money (especially if you are the Trustee of your SMSF and you are injured or ill).

Remember that if you are the Trustee as well as the beneficiary of your SMSF you must keep these roles separate. You have to comply with the rules and act in the interests of the fund whenever you are making decisions as a Trustee, even if your personal circumstances are difficult and you really need access to the money.