After a decade of using this strategy the traps are now becoming apparent. We know approximately 15 industry funds and 6 employer funds through retail providers that require a minimum balance or ongoing contributions with a 12-month period or else the insurance cover is terminated or invalidated.

In most cases if it is terminated or cancelled members are informed of the change but some people only find out at claim time because premiums are paid but a clause in the insurance policy invalidates a claim because contributions have stopped or balances have dropped.

Over the last few years I have met SMSF trustees who have come to me after the fact and those conditions had caught them out resulting in claims being denied. Even if discovered when cancelled it is often too late as people cannot get replacement cover elsewhere due to a health condition.

So to avoid falling foul of these conditions:

1. Read the insurance product disclosure statement of the policy to see if there is any reference to minimum balances or requirement for ongoing contributions for the insurance to continue.

2. Call the fund and ask for confirmation of the above in writing.

3. Leave enough to cover the minimum balance and one year's insurance premiums in the fund.

4. Rollover only the amount above this to your SMSF. Do not use the ATO's rollover initiation request to transfer whole balance of superannuation benefits to your self-managed super fund (NAT 74662). Contact the specific fund for their partial withdrawal/rollover form.

5. Let your employer SG contributions continue to be paid to the fund holding the insurance. If you are salary sacrificing you can ask for those contributions to be allocated to your SMSF but it may be simpler to let it all go to the existing fund.

6. Annually, or when a balance is sufficiently large, do another partial rollover of the excess funds to the SMSF, and check the rules again to make sure they have not changed.

7. Reference those insurances in your SMSF investment strategy under "consideration of insurance needs of the members" so you don't forget about them.

So be very careful when your clients get the paperwork for their new SMSF as the mountain of documents for your signature can often mean that you miss the importance of what you are signing. I believe that the ATO form mentioned above is one of the most dangerous documents and you should avoid using it.

Liam Shorte, principal wealth adviser and SMSF specialist, Verante Financial Planning