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ASFA outlines group life’s role plugging coverage gap

Life cover sold with superannuation helps cushion the impact of high levels of underinsurance among Australians, according to the Association of Superannuation Funds of Australia (ASFA).

Taxpayers would pick up the tab should automatic inclusion be removed.

It says underinsurance in relation to death, total and permanent disability and income protection currently costs the Government more than $1 billion a year in additional social security payments.

“Given the degree of underinsurance would increase markedly in the absence of default cover on an opt-out basis, so would the burden on the social security system,” ASFA says in a report.

About 75,000 death and disability benefit payments totalling about $5 billion were paid by super funds in 2015/16, it says.

Premiums for life and disability cover in super are typically lower than in comparable policies outside the retirement fund system, according to ASFA.

“For most Australians, the life insurance cover they have through superannuation is the only life insurance they hold. This cover enables members (and their families) to manage the financial risks associated with disability and death during their working life, while also supporting substantially improved retirement outcomes for claimants.”