Although more than 70% of life insurance in Australia is held through superannuation, there is still a considerable underinsurance problem, according to Rice Warner.

In a new report on group cover, the actuary estimates the median level of life insurance held meets about 60% of the average household’s basic needs.

The gap is larger among families with children.

The median level provides just 38% of the amount required to ensure family members and dependents maintain their standard of living after the death of a parent or partner.

In total and permanent disability (the median covers 13% of needs) and income protection cover (17%), the position is worse still.

Rice Warner says the underinsurance findings strengthen the argument for including life insurance in any legislation setting out the objectives of super.

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