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4.6.5.70 Assessing Insurance Bonds & Policies

Summary

A person's life insurance policies and insurance bonds MAY be an assessable asset.

 

This topic discusses:

  • the definition of life insurance policies,
  • how to assess a life insurance policy, and
  • how to assess an insurance bond.

 

Policy reference: SS Guide 4.3.9.20 Income from Life Insurance Products

 

Overview

Products such as term insurance, trauma insurance, total and permanent disablement insurance, income protection insurance and business expense insurance provide insurance cover with no investment component. They do not have a surrender value. They therefore have a nil value for assets test purposes.

 

Whole of life insurance and endowment insurance contain an investment component. The assets test value is the surrender value of the policy.

 

Further information is available in the DSS publication: Questions and Answers - Social Security Income and Assets Tests - Assessment of Conventional Life Insurance Policies.

 

Insurance bonds are financial investments (SSAct section 9(1B)(b)). They have a value for assets test purposes.

 

Act reference: SSAct section 9(1B)(b) Without limiting the generality of subsection (1A)...

 

Assessing life insurance policies

A life insurance policy IS an asset (1.1.A.290) of a person IF the person:

  • owns the policy, OR
  • is the policy holder, OR
  • has access to the value of the policy.

Example: A person's life insurance policy is their assessable asset EVEN IF it is for the benefit of their partner (1.1.P.70) or children.

Note: A person who is at least 10 years old but less than 16 years old can own a life insurance policy on his or her own life or the life of another person with the written consent of a parent or guardian. The young person is the policy owner. The parent or guardian acts as trustee.

 

The assessable value of a person's life assurance or insurance policy is the surrender value of the policy.

 

IF the policy has a surrender value but the person or their insurance company cannot provide the surrender value, an estimate can be worked out by multiplying the number of years that the person has had the policy, BY the annual premiums paid.

 

IF the estimated surrender value will affect or is likely to affect an income support recipient's rate of payment, the recipient MUST obtain the actual surrender value from their friendly society or insurance company.

 

Assessing insurance bonds

A person's insurance bond IS an assessable asset.

 

Some insurance bonds are held in the form of units while others may be held as an account balance.

 

IF the bond comprises units, the assessable value is:

  • the value of 1 unit, MULTIPLIED BY
  • the total number of units.

 

If the bond is account based the account balance is the asset value. The account balance can be obtained from the insurance company.

Explanation: The value of some insurance bonds can fluctuate AND may be different to the purchase price paid by a person.

 

Act reference: SSAct section 1064-G1 Assets Test

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Last reviewed: 16 May 2011


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