Where insurance policies are owned by an SMSF on behalf of a member, the SMSF trustee is named as the policy owner and the member is the life insured.
In most cases the premium is deducted from the member’s account. The trustee may be able to claim a tax deduction for the premium. In the event of a successful claim, insurance benefits are paid by the insurer to the trustee of the super fund and are generally added to the member’s account to form part of the member’s superannuation benefit. But other strategies and structures may be set up.
The structure of the insurance arrangement and flow of money is shown in the diagram.