SMSF insurance failures a litigation risk, advisers warned
A lack of consideration given by SMSF practitioners in regards to their client’s insurance arrangements could result in legal action in future years, an industry consultant has cautioned.
Speaking to SMSF Adviser, Mayflower Consulting director Sarah Penn said one of her major concerns within the SMSF industry is practitioners advising their clients to pull their money out of their existing super fund product when they establish their SMSF without considering insurance first.
“I’ve heard of numerous instances where the retail super fund has been closed and all the money has been put into self-managed super, and the person has been left with either no insurance or they’re absolutely paying through the nose for the insurance they can get,” said Ms Penn.
“It makes me very concerned and I think it’s the sort of area where potential litigation issues are going to come, further down the track, for accountants.”
Ms Penn said that once clients reach the age of 50, the chance of them or someone very close to them having a major health incident is very high.
“And that’s right when people get into SMSFs and drop their insurance,” she said.
“Self-managed super for any one individual is only part of the picture and it’s so important that whoever is giving them advice, whether they’re an accountant or an adviser, is making sure they’re covered if something happens.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.