Insurance in super ‘far from sufficient’: Rice Warner
Rice Warner says insurance within superannuation is still “far from sufficient” to meet full insurance needs, despite it being a key factor in reducing underinsurance.
Trustees are well-placed to obtain cover for fund members on good terms and at relatively low cost without the need for members to complete forms or undergo medical assessment, Rice Warner wrote on its Insight blog.
But it also said a balance needs to be established between providing a sufficient level of insured benefit and the impact insurance premiums will have on retirement benefits.
“Section 52(7) of the Superannuation Industry Supervision (SIS) Act in particular places a covenant on trustees requiring that insurance can only be offered or acquired if the cost does not inappropriately erode the retirement income of beneficiaries,” Rice Warner said.
“This can be complex to determine.”
Despite this, Rice Warner said it “supports the continuation of default death and disability insurance within superannuation product design”.
“For some members, the inability to work occurs due to illness, injury or death, all of which can occur at any time,” it said.
“If this happens before a member has accumulated a reasonable superannuation benefit, it is unlikely that the member’s superannuation balance(s) will make a meaningful contribution to meeting the family’s income needs.”
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