Direct life insurance
Direct life insurance is cover you take out directly via a comparison site or on an insurer's website. You can make the purchase without having to go through a broker or adviser with little to no medical underwriting needed.
Advantages of direct life insurance
- Quick and easy application. Buying direct means you can purchase either online or over the phone and be covered straight away.
- More control. You'll be able to tailor your policy including, how much you insure for down to which features you include.
- Choice of premiums. You can choose to pay in stepped or level premiums. Stepped premiums tend to start out cheaper but will increase over time while level premiums remain the same for the length of the policy.
Disadvantages of direct life insurance
- Requires more effort. Reading policy documents, comparing insurers and deciding on the right policy for you takes a bit of time and effort.
- All the responsibility. It's all up to you to make sure you choose a suitable policy that will cover you when it comes time to claim and that you fill the application out correctly.
- Pre-existing conditions. Some conditions may not automatically be covered or could be excluded for a certain period of time. Some, may not be covered at all.
Life insurance through superannuation or an employer
If you've got a super fund, chances are, you've already got some level of life insurance. These group policies can be easy to attain but don't always provide as much cover as you need.
Advantages of group life insurance
- It's often cheaper. A super fund usually buys life insurance in bulk for large groups of people, which means that premiums are often discounted. This form of pricing means you can expect to pay less for cover held inside superannuation.
- It's convenient. This type of cover offers guaranteed acceptance, and premiums are taken directly from your super balance. Not having to maintain a standalone policy can also mean less paperwork and admin.
- No medicals required. Unlike policies bought directly or through advisors, you won't usually have to supply your medical history or complete a medical examination.
Disadvantages of group life insurance
- Cover can be limited. Guaranteed acceptance means you will be given an automatic level of cover rather than one that's specific to your circumstances. The standard benefit amount is usually between $100,000 and $200,000. That may seem like a lot, but it's generally recommended that your life insurance is around 5 to 10 times your annual salary.
- If you change funds, your cover might end. It's common for us to change jobs these days, and with that, we often change super funds. But if you do this, there's a chance your cover will cease. That's because super funds must cancel insurance on inactive accounts after 16 continuous months.
- Chips away at your retirement. Premiums are deducted from your super balance, which means you'll accrue less interest and have less money sitting in your retirement fund when you're ready for it.
Retail life insurance
When you hire a financial adviser or insurance broker, they deal directly with insurers, take care of the legwork and advocate on your behalf. Retail life insurance is essentially a policy that's bought with the help of an adviser.
Advantages of retail life insurance
- Reliable and secure. You'll be fully assessed both medically and financially before your application is approved, which gives you an assurance that you'll be fully covered when it's time to make a claim.
- Access to more complex products. Some advisors will be able to sell you products that are customised and tailored exactly to your needs. Retail insurance is also less likely to be available through any other channels, so you will have to use an advisor to access them.
- Cover for more niche conditions. Whether it's a pre-existing condition, dangerous job or hobby, or you've been excluded before, an advisor can help you find cover when it's the most difficult.
Disadvantages of retail life insurance
- Share everything upfront. Retail insurance is the most involved when it comes to medical underwriting. Along with sharing medical records and completing a detailed medical and lifestyle questionnaire, you may have to complete a medical exam.
- A lengthy process. Consulting an advisor, receiving a statement of advice and finally setting up your life insurance policy can take much more time than simply buying one directly. Expect periods of up to 8 weeks before being insured.
- More expensive than through super. An advisor's role is to find a policy that's best suited to your needs which doesn't always translate to the cheapest policy.
