“Trustees feel like they don’t need it, that they might be financially well-off enough that they don’t need life insurance,” NobleOak chief executive Anthony Brown said.

“But often when it’s explained to them properly, they do see that there is a real need there. There is a lack of understanding of the importance of life insurance in that market.”

Mr Brown said that the other concern SMSF trustees have with insurance is the price of having an insurance policy.

“We did a little bit of research a few months ago and we found that some of the concern is, according to trustees, affordability,” Mr Brown said.

“We spoke to quite a few financial advisers and a number of them who dealt with SMSFs believe that there were two really important parts with a [SMSF insurance] policy.

“It had to be competitively priced and the other one was that it had to have flexibility if a situation changed.”

NobleOak are launching SMSF Direct Life in June, which is said will help address the underinsurance problem within the SMSF sector.

The product gives trustees the ability to transfer the policy in and out of an SMSF without cancelling the policy if the needs of members change.

“If someone didn’t want to keep it within their super fund and wanted to move it outside, they don’t have to go to a new underwriting and new pricing - they can manage their tax position,” Mr Brown said.