$8,474 Out-of-Pocket Saving After Insurance Restructure: A Case Study
- 8 hours ago
- 10 min read
Written by Christopher Hall, AdvDipFP | Authorised Representative, AFSL 526688 | March 2026
Case Study Summary
A NSW-based carpenter with eight years of unreviewed life insurance, TPD and income protection policies was paying $9,314 per year entirely from personal income. Following a complimentary review by Christopher Hall at Arrow Equities, his existing policies were cancelled and replaced with new policies at equivalent or greater cover amounts. The total annual premium was reduced to $5,574 — a saving of $3,740 per year, or approximately 40% of the original premium cost. By restructuring the life and TPD policies to be funded through superannuation, the amount paid from personal income fell from $9,314 to $840 per year — an out-of-pocket saving of $8,474 annually, representing a 91% reduction in personal cash outlay. No cover was reduced. No advice fees were charged.
Note: Client details have been anonymised. "Dave" is a pseudonym used with the client's consent. Identifying details including occupation, income and family situation are included with permission to illustrate the real-world impact of this outcome.
Client Snapshot
Dave is a carpenter based in New South Wales, earning approximately $120,000 per year. He is married with two young children and had recently refinanced his home to fund renovations — a decision that placed renewed pressure on the family's monthly cash flow. Like many Australian tradespeople, Dave had taken out life insurance, TPD (total and permanent disablement) cover and income protection when he first purchased his home eight years prior. The policies were set up correctly at the time. He had simply never had reason to look at them again.
Dave came to Arrow Equities through a trusted referral. The review was complimentary — no advice fees were charged at any point.
The Problem: Eight Years of Loyalty Tax
At the time of the review, Dave was paying $9,314 per year in insurance premiums — entirely from his personal income, with no super contribution involved. That is roughly $776 per month leaving the family's bank account, every month, for a set of policies that had never been independently assessed since the day they were issued.
Dave had no reason to suspect he was overpaying. His policies were legitimate, his cover was real, and no one had ever told him there was a better option. What had happened over eight years was a gradual accumulation of what the industry calls the loyalty tax — the compounding effect of annual premium increases applied to existing policyholders, while new customers at the same insurer continue to receive new-business pricing. This is sometimes referred to as premium creep, and it is one of the most consistent findings across Arrow Equities' 500+ policy reviews.
Across that review base, Christopher Hall consistently identifies premium reductions of between 30% and 60% when replacing long-standing policies with equivalent new-to-market cover — before any structural improvements are applied. In Dave's case, the total premium reduction was approximately 40%, with a 91% reduction in personal out-of-pocket cost once superannuation funding was factored in. Both figures are attributable to the combination of loyalty tax accumulation and a policy ownership structure that had never been assessed.
The problem is structural, not personal. Insurers are not penalising individual policyholders — they are simply repricing risk annually on existing books while competing aggressively on price for new customers. The result, after eight years without review, is a significant gap between what Dave was paying and what equivalent cover could be obtained for on the open market.
With a recently refinanced mortgage and renovation costs already stretching the household budget, $9,314 per year paid entirely out of pocket was a number worth examining.
What the Review Found
Two findings emerged from the assessment — one on cost, one on structure. Together, they produced an outcome that would not have been possible by addressing either in isolation.
The first finding was on premium cost. New policies at equivalent or greater cover amounts were available at meaningfully lower cost through alternative insurers, purely on the basis of competitive new-business pricing versus Dave's accumulated loyalty tax position. This is consistent with the pattern Christopher Hall identifies across reviews of policies held for five years or more without independent assessment.
The second finding was structural, and ultimately more significant. Dave had been funding all three policies entirely from his personal income — a common arrangement, but not necessarily the most cost-efficient one. Insurance inside superannuation costs Australians over $6 billion per year according to APRA data cited by Super Consumers Australia in their 2024 submission to APRA's Insurance Data Transformation project — yet the majority of clients presenting for review at Arrow Equities have never had their ownership structure assessed at all. Dave had no awareness that life insurance and TPD premiums can, in many cases, be funded through superannuation contributions — dramatically reducing the out-of-pocket cost to the policyholder without reducing the cover itself. For more on how this structure works and why it matters, see Arrow Equities' detailed guide on insurance through super vs personal payment.
Combining both findings — competitive repricing and structural optimisation — Arrow Equities identified a restructure under which Dave's existing policies would be cancelled and replaced with new policies: life insurance cover amounts increased, and TPD and income protection cover amounts carried across at the same levels.
What Changed
The restructured arrangement moved Dave's life insurance and TPD premiums into superannuation, funded via super contributions. His income protection cover was issued as a new personally held policy — a structure that may, depending on individual circumstances, allow the premiums to be claimed as a personal tax deduction. Whether this applies in a given situation should be discussed with a qualified financial adviser or accountant.
The super restructure also unlocked a tax benefit Dave had not previously had access to: a 15% tax offset that applies when life and TPD insurance premiums are funded through superannuation contributions. Because the premiums were previously held entirely outside super, this offset had never been available to him. It was not accessible under his previous structure — not because of anything Dave had done wrong, but because his policies had simply never been reviewed with that question in mind.
Dave's previous policies were cancelled and new policies were issued across all three cover types. Life insurance cover was increased. TPD and income protection cover amounts were maintained at the same levels as the cancelled policies.
The Outcome
Metric | Before Review | After Restructure |
Total annual premium | $9,314 | $5,574 |
Paid from personal income | $9,314 | $840 |
Funded via superannuation | $0 | $4,734 |
Super tax rebate (15% offset) | Not available | Unlocked |
Annual saving — total premium | — | $3,740 |
Annual saving — out-of-pocket | — | $8,474 |
Life insurance cover | Cancelled | New policy — cover amount increased |
TPD / disablement cover | Cancelled | New policy — cover amount maintained |
Income protection cover | Cancelled | New policy — cover amount maintained |
Advice fees charged | — | $0 |
Dave's total annual premium fell from $9,314 to $5,574 — a saving of $3,740 per year on the cost of cover alone. More significantly for the family's day-to-day finances, the amount coming directly out of personal income fell from $9,314 to $840 per year — an out-of-pocket saving of $8,474 annually.
For a carpenter earning $120,000 per year with a recently refinanced mortgage and two children, that is a material improvement to monthly cash flow — delivered through a complimentary review that took a matter of weeks to implement.
Individual outcomes will vary. The premium savings and structural benefits available through a policy review depend on a range of personal factors including age, health history, existing policy terms, superannuation balance and financial circumstances. Medical underwriting for new policies means that not all policyholders will qualify for equivalent terms, and individual health background can materially affect the pricing and availability of replacement cover.
Key Lessons From This Case
1. Policies set up correctly eight years ago are unlikely to remain competitively priced.Insurance markets reprice constantly. A policy that represented good value at inception may carry a significant loyalty tax after five, six or eight years without review. The absence of a problem is not evidence that no problem exists — it is evidence that no one has looked. See Arrow Equities' overview of when a premium increase signals it's time for a professional review.
2. Superannuation can fund life and TPD premiums, dramatically reducing out-of-pocket cost.This is one of the most consistently underutilised structures in Australian insurance. The majority of clients presenting for review at Arrow Equities have never been told that this option exists. Moving eligible premiums into super does not reduce cover — it changes how the premiums are funded. For many families, particularly those with mortgage and cash flow pressures, this structural change alone is transformative.
3. The 15% tax offset inside super is a benefit most policyholders are unaware of.When life insurance and TPD premiums are funded through superannuation contributions, a 15% tax offset may apply. This is not available to policyholders holding these covers personally. It is a genuine additional benefit of the restructured arrangement — one Dave had no access to for eight years, not through any fault of his own, but because the structure had never been assessed.
4. A complimentary review carries no financial risk.Arrow Equities completed this review at no cost to Dave. No advice fees were charged. The outcome — $8,474 in annual out-of-pocket savings — was achieved entirely through the review and restructure process.
Frequently Asked Questions
Can life insurance premiums be paid through superannuation?
In many cases, yes. Life insurance and TPD (total and permanent disablement) premiums can be funded through superannuation for eligible policyholders. This arrangement means the premiums are paid from super contributions rather than personal income, which can dramatically reduce the out-of-pocket cost to the policyholder. Income protection premiums are generally not funded through super, as the tax treatment is more favourable when held personally. Whether this structure is appropriate depends on an individual's superannuation balance, contribution limits and financial circumstances. See Arrow Equities' detailed guide on insurance payment structure for a full explanation.
What is the 15% tax offset for insurance premiums inside super?
When life insurance and TPD premiums are funded through superannuation contributions, those contributions may be taxed at the concessional rate of 15% inside the fund, rather than at the individual's marginal tax rate. This creates a tax efficiency that is not available when the same premiums are paid from personal after-tax income. The practical effect is that the real cost of the cover is lower inside super than outside it — a benefit that many policyholders are unaware of because their policies were never structured to access it.
Does moving insurance into superannuation reduce cover or change the policy terms?
Not necessarily. In many restructuring scenarios, equivalent or identical cover can be maintained through a new policy held within or linked to a superannuation fund. The key distinction is in how the premiums are funded, not in the nature or amount of the cover itself. That said, any restructure involving new policy issuance may require fresh underwriting, and individual circumstances vary. A professional review is the appropriate way to assess whether a restructure is suitable and what, if any, underwriting considerations apply. See Arrow Equities' guide on medical disclosure in insurance applications for context on how underwriting works.
How does funding insurance through super affect my superannuation balance?
Premiums funded through super are drawn from superannuation contributions or the existing super balance, which reduces the amount available for retirement accumulation. This is a genuine trade-off that needs to be weighed against the cash flow benefit of removing the premiums from personal income. For policyholders under significant cash flow pressure — such as those with recent mortgage refinancing or growing family expenses — the cash flow benefit may substantially outweigh the impact on long-term super accumulation. A financial adviser can model both outcomes for a specific client's circumstances.
Is income protection better held inside or outside superannuation?
The appropriate structure for income protection depends on individual circumstances including tax position, superannuation balance, contribution caps and cash flow priorities. There are meaningful differences in how income protection is taxed and paid depending on whether it is held inside or outside super, and the right answer varies from person to person. This is one of the key questions a professional insurance review is designed to address. A qualified financial adviser can assess which structure is appropriate for a specific situation — this is not a decision that should be made without personalised advice.
How do I know if my insurance structure is right for my situation?
The most reliable way to assess this is through a professional review that examines not just the policy terms and premiums, but the broader financial structure — including superannuation eligibility, contribution limits, tax position and cash flow priorities. Many policyholders who present for review at Arrow Equities have never had this assessment conducted. Policies are often set up correctly at inception for the circumstances at that time, but financial situations change — and so do insurance markets. Arrow Equities completes 10 to 20 reviews of this nature every month. The professional review process is complimentary and carries no financial obligation.
Book a Free Insurance Consultation
Arrow Equities offers complimentary insurance reviews for Australian families and professionals. If your policies have not been independently assessed in the past three to five years, there is a reasonable likelihood that a review would identify either a premium saving, a structural improvement, or both.
Christopher Hall has completed more than 500 insurance policy reviews. The review process is explained in full at the Arrow Equities Insurance Premium Review Guide.
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