Underinsurance leaves SMSFs exposed
Many self-managed superannuation funds (SMSFs) are failing to correctly insure their assets, according to Self Super Insurance managing director John Kelly.
All fine art and collectable assets purchased on or after 1 July 2011 must be insured in the name of the fund within seven days of acquisition (SMSFs that held collectables prior to 1 July 2011 have until 1 July 2016 to comply with the new rules).
But according to Kelly, many SMSF trustees are incorrectly insuring new artwork under their existing Home and Contents insurance.
In addition, owners of investment properties within SMSFs are neglecting to take out rent protection insurance, he said.
"Running an SMSF comes with inherent risks beyond just investment risk, particularly with such a fast-growing industry and dynamic legislative environment," said Kelly.
"Often there are risks specific to SMSFs which general insurance policies don't cater for," he added.
The rules about what constitutes a 'repair' or an 'improvement' to an investment property also have implications for property insurance, Kelly said.
"Many people don't consider insurance because they think it won't happen to them, but it is so easy to take this risk out of your fund - and the cost is immaterial compared to the amount you can lose," he said.
"We are looking to provide a holistic solution for SMSFs, so they can manage their fund in a prudent and well organised fashion which includes appropriate insurance," Kelly said.
Recommended for you
The Federal Court has dismissed a conflicted remuneration case brought by ASIC against the director of life insurance distributor Freedom Group, where Bali holidays and Vespa purchases were among sales incentives.
Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
