- Life Insurance Products
- What is Life Insurance?
- Why Do I Need Life Insurance?
- How to Purchase Life Insurance
- Key Person Insurance
- Life Insurance vs Income Protection
- Life Insurance Glossary
- Frequently Asked Questions
- Is Life Insurance Tax Deductible?
- How Much Life Insurance Do You Need?
- Best Life Insurance
- Income Protection & GST
- Life Insurance And Superannuation
- Life Insurance For Seniors
- MLC Life Insurance
- When Is Life Insurance Paid Out?
Is Life Insurance Tax Deductible?
Whether your life insurance premium is tax deductible or not will depend on what kind of insurance it is and how you purchased it.
The term ‘life insurance’ refers to four types of cover: life, trauma, total and permanent disability (TPD) and income protection. Each cover has a different purpose. You’re likely to have some cover through your superannuation fund, but it may not be tailored for you.
You can also purchase insurance outside of your super from insurance companies, brokers or financial advisers.
The different types of life insurance
When people speak about life insurance, they’re referring to the following four types of cover:
• Life insurance – also referred to as ‘life cover’, ‘death cover’ or ‘term life insurance.’ If you pass away, your life insurance policy may pay out a pre-agreed amount of money in a lump sum to you or your nominated beneficiaries.
• Trauma cover – also referred to as ‘critical illness cover’ or ‘recovery insurance.’ This insurance provides cover for specified illnesses like cancer, strokes and heart attacks. In a worst-case scenario, you could be paid a lump sum to help with your medical expenses, ongoing recovery and rehabilitation costs.
• Total & permanent disability (TPD) – if you’re permanently unable to work because of a serious injury or illness, you could be paid a lump sum to assist with rehabilitation and living costs.
• Income protection – also known as ‘salary continuance cover’, this insurance is usually paid in regular monthly instalments if you’re unable to work due to injury or illness. You could receive up to 75% of your work income for a specified period.
If the unthinkable should happen to you, these four types of life insurance may help you continue meeting important financial obligations.
They can also relieve the intense financial pressure your family or beneficiaries will feel if you’ve passed away.
How are life insurance premiums calculated?
The premiums for all four types of life insurance are calculated based on various factors1. These can include:
• Your age
• Your gender
• The state of your health
• Whether you smoke
• What you do for a living
• Your level of income
To finalise the cost of your policies, insurance companies may ask for health checks to be made as well as other financial information. This can include proof of income.
Is life insurance tax deductible when obtained through superannuation?*
Through your superannuation fund, you may have some life cover, TPD and income protection.
Each of these types of cover are paid for through deductions from your super account balance2. The Australian Taxation Office (ATO) advises that the premiums on insurance policies taken through super accounts aren’t personally tax deductible3. Super funds don’t provide trauma insurance.
Is life insurance tax deductible if I get it outside of superannuation?*
The ATO advises that under any circumstance, a premium or any part of a premium isn’t tax deductible if the policy compensates you for physical injuries3.
This means that if you’ve bought life, TPD or trauma cover policies outside of super they’re not tax deductible. You can, however, claim tax deductions on the premiums you pay for insurance against the loss of your income.
So if you’re purchasing higher levels of income protection outside of your super fund, you can personally tax deduct this. The amount you’ll be able to deduct will be based on how much you earn and the tax bracket you fall under.
Ready to find the right Life Insurance for your needs?
At the end of the day, the only form of life insurance that’s personally tax deductible through an individual policy is income protection.
If you’re looking to purchase an income protection policy to protect yourself against income loss or any other type of life insurance, feel free to give us a call on 13 19 20.
* As every individual’s circumstances are different, we recommend you seek specific taxation advice from an independent tax adviser.
iSelect does not compare all insurers or products in the market. Not all products are available at all times.
iSelect Life Pty Ltd – ABN 89 124 304 347, AFS Licence Number 331128. Any advice provided by iSelect is of a general nature and does not take into account your objectives, financial situation or needs. You need to consider the appropriateness of any information or general advice we give you, having regard to your personal situation, before acting on our advice or purchasing any product. You should consider iSelect’s Financial Services Guide which provides information about our services and your rights as a client of iSelect. We receive commission for each product sold.