Rice Warner research highlights the extent that superannuation funds are critical to providing life insurance cover for a high proportion of employees.

Our statistics show that more than 70% of Australian life insurance policies – more than 13.5 million separate policies – are held through superannuation funds. Each year, there are about 17,000 disability benefits paid and about 46,000 deaths (though this includes those on pension too) .

Yet despite the wide member coverage provided through superannuation funds, the level of underinsurance remains high.

We estimate that the median level of life cover meets about 60% of the basic needs for average households – and a much-lower proportion of needs for families with children.

Further, the median level of life cover will provide just 38% of the amount required to ensure that family members and dependants maintain their standard of living after the death of a parent or partner.

For total & permanent disability (TPD) and income-protection cover, the position is worse. Median cover meets only 13% of TPD needs and 17% of income-protection needs.

The degree of underinsurance together with the role of superannuation funds in providing much of the coverage emphasises why the Government should include the provision of insurance in its planned legislation of the primary and subsidiary objectives of superannuation.

Many fund members will be prevented by death or disablement from working through to retirement age .  They will not be able to provide for themselves or their families before and after retirement without the supplement of an insurance benefit.

Additionally, income-protection insurance assists in keeping family finances together and assist households to keep preparing for retirement.

As discussed in our recent submission in response to the Treasury discussion paper Objective of Superannuation, there is a close link between the providing of retirement income through superannuation and insurance coverage through superannuation. The link is indelible.