The Guides to Social Policy Law is a collection of publications designed to assist decision makers administering social policy law. TheĀ information contained in this publication is intended only as a guide to relevant legislation/policy. The information is accurate as at the date listed at the bottom of the page, but may be subject to change. To discuss individual circumstances please contact Services Australia. Assessing insurance bonds & policies


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

This topic discusses:

  • the definition of life insurance policies
  • the income test assessment of life insurance policies
  • the assets test assessment of life insurance policies, and
  • how to assess an insurance bond.

Policy reference: SS Guide Income from life insurance products


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.

Investment type life insurance policies (e.g. whole of life insurance) contain an investment component. These products have an assessable asset value.

Insurance bonds are financial investments. They have a value for assets test purposes.

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

Income test assessment of life insurance polices

From 21 July 2007, the income test assessment of conventional life insurance policies changed to include income bonuses. The term 'bonuses' means all profits on life insurance.

While the main purpose of conventional life insurance policies is to provide death cover, some policies include an investment element which may pay bonuses to the investor. A person who invests in such a life insurance policy is seen as deriving income from a profit-making transaction.

During the term of the policy, bonuses are not assessed as income.

Upon withdrawal from a policy (whether by surrender or by the policy reaching the maturity date specified in the policy) the difference between the surrender/maturity value; and the sum of the purchase price (if any) and the premiums paid by the investor over the life of the product is held as income over 12 months (under the income test).

The balance remaining with the insurance company is then treated in the same way as any other financial asset and is assessed under the income test deeming rules.

If only the bonuses are cashed in, then the value of the bonuses is assessed as income over 12 months commencing on the day on which the person becomes entitled to that bonus.

If the bonuses are received before claiming a social security payment, they still affect a person's assessment under the income test for 12 months commencing on the day on which the person becomes entitled to that bonus.

The payment of an insurance death benefit is not assessed as income.

Assets test assessment of 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 policyholder, 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.85) 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.


  • the person became the owner of the policy after 1 July 2019, AND
  • the person became the owner of the policy after the person reached pension age, AND
  • the sum of the amounts paid for the policy in any 12 month period exceeds 15% of the maximum death benefit that would be payable if the person died on the day of assessment.

In this situation, the value of the life insurance policy is the higher of:

  • the surrender value of the policy, OR
  • the sum of the amounts paid to purchase the policy, less any commuted amounts.

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.

Act reference: SSAct section 1121B Value of life policy

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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