Page 30 - Insurance Times August 2020

Y Default cover - automatic acceptance level - no health Contributions can be made by employer, member or
evidence needs to be provided for underwriting spouse, Government. Member can select his investment

Y Tax benefit for premium paid. type. But there is investment risk associated with this
fund because fund's earnings depend on market
Y Premium amount is subsidized. performance.
Y Insurance cover ceases if contributions to SA fund stop.
Retirement Fund = (Accumulated contributions) +
Investment earnings - Taxes - Fees paid for fund.
Coverage options in Superannuation.
b. Defined benefit Fund - Retirement benefit is fixed. A
Y Death, Total and Permanent Disability, Income defined benefit is more suitable for employees who
Protection.
have been with the employer for a longer period and
Y Death - Benefits paid as lump sum to nominees the employer is strong enough to guarantee the
Y Total and Permanent Disability - Lump sum paid to benefits- this is common for government employees.
individual when he is disabled. Scope of cover depends Benefits = (Salary) x (Accrual rate) x (Years of service)
on insurer.
Salary = Average salary for the last three years
Y Income protection - income provided for certain period
Accrual rate expressed as a % of salary - it is the amount
if insured cannot pursue any occupation due to
the benefit increases each year.
temporary disability or illness. This is called as "Salary
Continuance". Minimum duration for which individual
must be disabled for claiming the cover is 30 or 60 or Superannuation contributions
90 days. Benefit paid up to a maximum of 2 years or SA contributions are deposits made into the SA fund.
up to 65 years. The claim is limited to 75% of a person's
gross income. Types of contributions
There are two types of contributions: Concessional and Non
Beneficiary nomination concessional contributions. Concessional contributions are
An individual or legal entity who benefits from a person who those where tax deduction can be claimed. Non concessional
provides help is a beneficiary. In a Life insurance policy, on contributions are contributions to superannuation fund with
death of the insured, the beneficiary receives the claim after-tax money - money one puts in the Super fund on which
amount from insurance company. In binding nomination, one has already paid tax and contribution on which there is
member instructs the trustee of the fund about the no income tax deduction. Profits from business or from sale
proportion in which the SA benefits are to be distributed in of an asset or inheritance or contribution made by spouse -
the event of his/ her death. all these are considered non concessional contributions.

Nonbinding beneficiary nomination Concessional contributions are those made as per statute
Trustee will decide to pay claim to a non-dependent (if or as per legislation or voluntary contributions by employees
employee dies) only if a dependent cannot be found. It is or contributions made by people who are self-employed.
important that SA member should inform the trustee about
the nominations.

Encouraging investments in superann-

uation funds
Start early; contribute regularly; compound earnings.
Government co-contributions, allocate pre-tax salary to
super. Convert assets to super. Contribution to super is at a
concessional rate for those above 50 years of age. Reduced
tax liability for investments in SA funds is an advantage.

Two types of superannuation fund.
a. Accumulation Fund - This is like a savings bank account.

30 The Insurance Times, August 2020