SMSF trustee underinsurance ‘overblown’

SMSF trustee underinsurance ‘overblown’



Reports of underinsurance among SMSFs are often inaccurate as they do not take the insurance trustees hold outside of their fund into consideration, new research has found.

According to the fifth annual Intimate with Self-Managed Superannuation report – compiled by CoreData for Nabtrade and the SMSF Association – the often publicised risk of underinsurance among SMSF trustees is “overblown”.

This is because the data on insurance coverage held in SMSFs is “skewed” by the greater underinsurance among older trustees who make up the majority of the broader trustee population, the report said.

“What is often ignored is that more than one in five (21.2 per cent) trustees have insurance coverage either through their APRA fund or outside super, although this is down from 28.6 per cent in 2013,” the report said.

“Close to half (48.4 per cent) of baby boomer trustees and the vast majority (85.9 per cent) of pre-boomer trustees do not hold insurance in any form.

“On the other hand, younger trustees for whom insurance would be more affordable, accessible and necessary, are considerably more likely to hold insurance in some form,” it said.

The report found two-thirds (66.7 per cent) of Gen Y trustees hold insurance in some form, including 42.9 per cent who hold it through their SMSF.

This was while close to three-quarters (73.2 per cent) of Gen X trustees hold insurance in some form, including 47.6 per cent who hold it through their SMSF.

CoreData also said that baby boomer and older SMSF trustees who opt not to hold insurance inside their fund have made a “deliberate” choice as they believe it is too costly and not worthwhile for them at their current stage of life.

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