Superannuation fund members are uncertain as to what their fund-supplied life insurance provides and may be both under-insured and insured for the wrong types of cover.
According to research conducted by Zurich Financial Services, this confusion around insurance cover has led to mis-insurance and the assumption “that life insurance is a homogeneous 'box they have already ticked’”.
The research polled 394 employed Australians who were required by law to be members of a superannuation fund. It found while superannuation based life-insurance had boosted the level of people with some form of life insurance it also created a false sense of security.
Just over half of the survey respondents were aware they had life cover through their superannuation fund, with Zurich stating this finding most likely indicated a lack of knowledge instead of lack of cover.
However the research also found that of those who were aware they have life insurance via their superannuation fund, 11 per cent believed it also covered traumatic illness, 7 per cent hospital expenses and 5 per cent optical and dental expenses normally covered under private health insurance.
Similar lack of awareness was seen in the area of income protection insurance, with only a quarter of respondents aware of their level of cover and only 15 per cent able to correctly identify the waiting period before payments began.
Zurich Life and Investments head of marketing Richard Dunkerley said the knowledge gaps pointed to the need for further education and advice around insurance.
“The research findings are a timely reminder for consumers to become better acquainted with the detail of their policies, ideally by seeking qualified advice, to help avoid the downside consequences of the 'mis-insurance’ gap,” he said.
“The results further indicate the need for a more comprehensive program of literacy regarding life insurance to raise the general level of education and understanding amongst Australians,” Dunkerley said.
“There is a duty of care on all participants within the superannuation, advice and insurance sector to do more to educate consumers at every turn,” he said.
The research also cited work conducted by Rice Warner’s in its 'Underinsurance in Australia Report 2012’, which estimated the gap between cover held and cover required to maintain current living standards at $2166 billion for death cover, $7912 billion for total and permanent disability and $589 billion for income protection.
