Is life insurance difficult to understand?
There are different types of life insurance policies available on the Australian market, each with their own set of:
- Features and benefits
- And exclusions
You might be thinking, “how is policy A different to B, or maybe even with C? They all look the same to me.” If this is the case, you are not alone. You may be unsure on how to find adequate cover for you and your family without stretching your budget.
Here's why seeking advice is a smart move.
They will help you make an informed decision on the type of cover, level of cover and policy arrangement that is most suited to you. This can remove much of the stress that you may be experiencing trying to find the right policy, saving you both time and effort as the adviser compares multiple policies for you.
'71% less likely' was calculated using figures from ASIC's Report 498: Life Insurance Claims: An Industry Review. The report states that the average declined claims in a non-advised policy is 12% in comparison to an advised policy at 7%. 12% (non-advised) is 1.71 times the amount of 7% (advised) hence a 71% less chance of an advised policy claim being declined.
Who Can Provide Life Insurance Advice in Australia?
Life insurance advice is designed with the intent to influence a person’s decision in choosing a specific financial product or class of products, which may be either personal or general.
General life insurance advice does not contain any specific recommendation that is tailored to the applicant’s personal situation. While, personal advice takes into consideration the person’s individual needs and situation, in which it would be tailored accordingly to match the person’s needs.
Therefore, any entity that provides advice must have a license to enable them to do so, either as licensee or as an authorised representative of a licensee. They also must be registered with Australian Securities and Investments Commission (ASIC). Life insurance advisers must also maintain the minimum training and competency standards, as set out by ASIC Regulatory Guide 146 (RG146), which also includes any appropriate educational level for more complex activities.
How is Life Insurance Advice Regulated in Australia?
ASIC is primarily responsible for protecting consumer’s rights in the financial services sector, as set out in the ASIC Act 2001. ASIC is also responsible for enforcing the relevant sections of the Corporations Act 2001 and the Trade Practices Act 1974 as applicable to entities that provide advice on financial products. These provisions restrict advisers from misleading, deceptive, fraudulent, and unconscionable conduct when dealing with the sale of financial products.
Future of financial advice (FOFA)
FOFA was introduced by the Australian Government in 2014, in an attempt to ensure that financial advice is provided with integrity to customers.
According to an ASIC study of 200+ financial advice files, there has been an increase in the quality of financial advice since FOFA was introduced.
|Compliant advice||Non-compliant advice|
What Information is Required to Get Tailored Life Insurance Advice from Insurance Consultants?
To receive personal life insurance advice that is tailored towards your needs, an insurance adviser will generally need to collect the following types of information:
- Personal details
- Age or date of birth
- Contact details
- Phone number
- Details on family members/dependents
- Financial situation
- Income and expenses
- State of health
- Pre-existing medical conditions
- Lifestyle choices (smoking and alcohol consumption)
- Hobbies and pastimes
- Details of life insurance that you currently hold
Getting a Statement of Advice when You Receive Life Insurance Buying Advice
When given a personal life insurance advice by an authorised adviser, sections 947B and 947C of the Corporations Act 2001 require a statement of advice (SOA) to be issued to the client. A SOA is a document that outlines important information that you should be aware of, have a clear understanding of and use to decide whether or not you should rely on the advice that has been provided.
A standard SOA is to be set out in a language that is easy to understand and should generally contain the following:
- A clear statement of the name and contact details of your authorised representative
- A summary of your personal circumstances
- Your primary objectives and priorities for life insurance needs
- Product recommendations, with a description of the financial product(s), including Product Disclosure Statements (PDS)
- The scope of advice and why it is appropriate
- Advantages and disadvantages should you follow through with advice
- Description of any remuneration, including commissions and other benefits
An SOA generally must be given to you, as soon as the advice has been provided to you and it is important to keep a copy of it for at least seven years.
How Much does it Cost to Get Personal Life Insurance Advice?
When you first request a life insurance quote, an adviser will contact you to further discuss different policy options and prices that may be suitable to your needs. You are under no obligation to sign up when making an enquiry. If you agree to proceed with a specific life insurance policy, you also won’t be charged for an establishment fee. This means, there is no cash transaction in place until your first premium payment when your policy starts, in which the date can be found in the policy schedule. In addition, fees for medical underwriting may apply, so it is important to double check with your life insurance adviser.
How is Buying Direct Different to Getting Life Insurance Coverage Advice?
Direct life insurance can be obtained directly through a life insurance provider or a financial organisation. The process of purchasing a direct life insurance is generally quite simple and straightforward, with limited or no medical underwriting required. The entire transaction can usually be completed online, over the phone or in person at one of the providers offices. When purchasing life insurance directly, it is crucial that you have done your research of the policies on offer and read the PDS carefully, to have a clear understanding on what you will or will not be covered for.
On the other hand, getting advice when purchasing a life insurance policy requires the involvement of a life insurance adviser or financial planner, which can be quite a time consuming process. However, the advice you receive is tailored to your needs and personal circumstances, as the adviser has done the work and used their expertise to find competitive policies available in the market. Working through an adviser will generally increase your chances of finding more competitively priced products as direct providers increase premium to account for the risk of reduced underwriting.
Benefit of Life Insurance Advice for High Risk Applicants
When you apply for a life insurance policy, an insurance provider takes into account your personal details and circumstances to determine whether or not they are able to provide cover for you and the premium rates you pay. Common factors that they consider include age, gender, current health condition, lifestyle choices, hobbies and occupation.
If you have a pre-existing medical condition, participate in risky activities and work in a dangerous environment, it will affect the assessment of your life insurance application. Life insurance companies deal with risks, so this means, the higher the risks you carry, the more likely it is for you to claim on your policy. Based on this assessment of risk, the provider will then determine whether a loading on your premiums is applicable, to place an exclusion or reject your cover altogether.
It can be difficult to find affordable life insurance cover if you are a high-risk applicant, however, that doesn’t mean you can’t get cover at all. Seeking help from a life insurance adviser can be valuable for applicants who have struggled to get cover in the past. Life insurance advisers use their knowledge of the marking and find providers that are most willing to offer cover.
What are Your Rights when Receiving Life Insurance Advice from a Consultant?
As recognised under common law, life insurance advisers have duty of care when providing their service and advice to you. There are two legal duties that advisers must abide to when performing their roles:
- To exercise high level of care as the circumstances require
- To ensure that no misleading or deceptive information is given
Should you find that the duty of care has not been carried out by the adviser and you suffer a loss as a result, you may be able to hold them accountable for negligence.
Benefits of Life Insurance Tips and Advice
Shopping around for the right life insurance cover for you on your own can be daunting. However, with the help of a life insurance adviser, there a number of benefits that you can reap:
- Underwriting: Your application for cover is assessed and once approved, your policy is underwritten at this time, instead of at the time of claim.
- Guidance: An adviser will guide you through the process of applying for cover, providing you with more information on any personal details, medicals that may be required to make sure the application process is as smooth as possible.
- Knowledge: An adviser has the knowledge and expertise to provide you with recommendation on the right type and level of cover, depending on your current life stage, financial situation and family obligations. They also provide advice on how to structure your life insurance plan; inside or outside superannuation, own vs any occupation and tax implications.
- Unbiased advice: It is part of their duty of care to ensure their clients are able to make sound financial decisions. Therefore, it is important to be unemotional and objective when providing advice for what can be difficult to discuss.
- Niche advice: Advisers have the knowledge to be able to provide advice for specialised areas, such as medical professions, high risk occupations and business owners.=
How to Spot a Good Adviser: Tips to Ensure You Get the Best Life Insurance Advice
Getting a quality life insurance advice is crucial, as it will affect the decision that you make for your insurance needs. Therefore, in order to get good advice, it is essential to know what makes a good adviser, so you have the confidence that he/she has your best interest in heart. Some important factors to consider include:
- Certification: As previously mentioned, a good adviser must be authorised and registered through ASIC to be able to perform their duties. If you are using the service of an insurance adviser, make sure that they hold an Australian financial services license (AFSL).
- Experience and qualification: It is essential that a good adviser has the knowledge and experience to have the ability to give you recommendations that are tailored to your needs and situation. The number of years that he/she has been working in the finance industry is another good indication of their experience.
- Service: Making a decision on a life insurance product is a major investment, so sometimes you may need a little bit more time to think it over and have a closer read through the PDS. Therefore, a good life insurance adviser does not pressure you into making a decision right away and sign a contract.
- Fees: When you submit a request to speak to life insurance adviser,there is absolutely no obligation to sign up for a policy when making an enquiry.
If you are looking to purchase a life insurance policy and not quite sure where to start, consider obtaining life insurance advice. An authorised life insurance consultant can provide you with the assistance you need in finding the right type of product and level of cover for your situation. They also have the knowledge of the Australian financial market, so that they are able to find competitive prices on policies to suit your budget.
Receiving Life Insurance Advice Via Life Insurance Finder
Looking to get advice from Life Insurance Finder? Then you may wish to submit an enquiry on the form located below the video.
The following video shows the process on how to submit an enquiry with Life Insurance Finder. Once the request has been sent, a life insurance adviser will contact you directly to discuss your insurance needs. There is no obligation for you to sign up for a policy at the end.