The trouble with life insurance…

The importance of life insurance

trouble coming!

If illness, injury, or even death were to happen to an adult child who had just purchased a home, it would be quite likely that the child would have trouble meeting mortgage repayments and could possibly even lose the home.

With lump sum covers, the easiest way to do this is to set up a non-super life policy owned by the parents on the life of the child. This ownership structure would satisfy CGT exemptions under section 118-300 ITAA97 for term life and section 118-37 ITAA97 for TPD and trauma.

The level of cover should at least be the amount of the loan or gift, so that the parents would not have a shortfall if an insurable event occurs. Income protection for the child should also be considered. This must be owned by the child to ensure that a tax deduction can be claimed. Once the loan is repaid, the parents have the option of transferring the insurance cover to their adult children, so they could assume premium payments.

Contact your financial adviser today to find out the best option for you.