Is My Life Insurance Tax Deductible?
There are many types of life insurance policies in Australia out of which some are tax deductible while the others are not. The type of insurance policy you have and if you have taken a life insurance plan through superannuation will determine the tax you will have to pay. This being said as a general rule, life insurance premiums are deductible under certain tax law considerations. Usually, deductible premiums usually include workers compensation insurance, indemnity insurance and premiums paid by self employed professionals for disability insurance when they cannot work due to loss of limbs or other disabilities.
Life Insurance Tax Deductibility Guidelines
Since this topic is confusing for many to understand, you should remember one simple rule that is you need to qualify the insurance plan you have. Majority of the income protection insurance plans are tax deductible where as trauma insurance plans are not. When life insurance plans and total and permanent disability plans are taken out separately or as standalone plans, these plans are not tax deductible which means that you cannot enjoy tax benefits on such stand alone plans. It should be noted that income insurance plans are usually tax deductible irrespective if you have taken a stand alone or add on cover.
Life Insurance through Superannuation
Life insurance plans through superannuation offer two benefits that are; tax benefits and lower premiums. Since super funds are now available even to self employed individuals and employees working for companies, these benefits can be enjoyed by almost every permanent resident of Australia. Taking life insurance through superannuation can guarantee two things that are; you will be getting a higher take home salary amount and your family will receive financial assistance from insurers when you are no longer there to support your family.
Life Insurance Options that are Tax Deductible
Most people believe that life insurance is limited to term life insurance plans; however the truth is that life insurance plans cover various types of insurance covers such as TPD cover, income protection and trauma insurance plans. For detailed advice and for information regarding tax details for life insurance plans, you should preferably contact either a financial advisor or an insurance agent who offers financial advice. Insurance agents and insurance companies can be contacted online by visiting their websites.
Conclusion
Life insurance is a term used for various insurance plans such as TPD plans, income insurance plans and trauma insurance plans. Critical insurance and trauma insurance plans are the same thing. The tax benefits you receive will depend on the type of cover you choose which means that if you choose an income protection plan you will receive tax benefits where as if you choose a standalone TPD cover or Life insurance plan you will not receive tax benefits. If you opt for a life insurance plan through your superannuation account then you will receive many benefits which include a higher take home salary and lower premiums along with tax benefits.