Don't want to bother with an adviser? Consider life insurance without advice.
In Australia, it's possible to get cover without a financial planner or adviser. This guide looks at the reasons to consider a policy without advice and the little traps to look out for.
What is 'No Advice' Life Insurance?
Life insurance in Australia is typically purchased via three common channels. Cover 'without advice' is available depending on the channel:
- Retail. With an adviser or financial planner.
- Directly from an insurance brand. Without an adviser, straight from the insurer.
- Through your super. Usually without an adviser and automatically included with your super.
Get life insurance quotes without an adviser
Is life insurance without advice a good idea?
- Why would I buy life insurance without advice? Four reasons to consider
- Traps to look out for if you do skip advice
- Should I purchase personal insurance without advice?
Life insurance with vs without advice
There are a number of benefits of buying no advice life insurance. These include:
It’s easy to apply.
Purchasing life insurance through an adviser or consultant can seem like a complex and time-consuming process, which deters many people from taking out cover. Direct life insurance makes the process easier.
Typically, if you're under 70 years old, you can get a quote online and apply over phone straight away. Most policies won't require you to undergo medical underwriting at the time of application. This allows applicants to find cover in a quick and easy manner.
Immediate accidental death cover.
Most policies provide immediate death cover once your application has been received. Not only is this convenient, it also offers added peace of mind.
If you know your cover needs, you can save time.
If you understand your cover needs and are confident reading a product disclosure statement, you can get covered quickly without being underinsured.
This type of insurance is less about a complicated structure of benefits and more about providing a simple and straight forward level of cover.
You get a fast response.
You’ll know virtually straight away whether your application for life insurance without advice has been approved.
Despite its undoubted benefits, there are a handful of drawbacks to taking out life insurance without advice. Four key downside include:
Not being covered for your personal circumstances
What's covered under many direct life insurance policies is still often limited due to the minimal level of underwriting involved. No advice life insurance policies can be ‘no-frills’ offerings that don’t offer the same features offered through an adviser e.g. the ability to top your policy after a claim.
- Taking out an inadequate level of cover.
If you purchase insurance through an adviser, you’ll end up with a policy that has been customised to suit your particular needs. Direct life insurance policies usually take a ‘one size fits all’ approach. This means that the sum insured may not be enough for you needs.
Not having a clear understanding of different policy features.
You won't have an adviser on hand to run you through the ins and outs of different policies. An experienced adviser will be able to help you make sense of complicated product disclosure statements and terms and conditions.
People who buy direct life insurance, sometimes take out a policy without clear understanding of what their policy does and doesn’t cover. Take the time to read the PDS closely and make sure you comprehend what each feature of your policy means.
Increased exclusions that you are not aware of.
Direct life insurance policies may contain more exclusions than policies purchased with advice. This can be traced back to the simple application process. As direct life insurance companies ask few questions about your health and occupation when you apply, their policies cannot be fully underwritten.
As a result, a larger range of standard exclusions are placed on these policies. These extra exclusions can be for things like some hazardous or dangerous sports, claims related to drug or alcohol use, riots or acts of terrorism or war, risky occupations and a range of pre-existing medical conditions. Some policies will also reduce the amount of cover offered as the policyholder gets older.
You may not even know that you are excluded for these unless you read the product disclosure statement PDS in depth.
This comes down to your personal needs such as how much cover you actually need and how much you want to customise your cover. Direct life insurance can be a good option for:
- People who are confident in their insurance knowledge. That is confidence in both life insurance products and the insurance market itself to find and apply for cover without the assistance of a consultant.
- People who are time poor. Other candidates for direct cover are those that are simply quite time poor and do not wish to spend the extra time that it takes to apply through a consultant.
If you do purchase a policy without advice
finder recommends that anyone considering direct cover has a clear understanding of what the terms and conditions of their policy prior to submitting their application. Despite the purchase process being quicker, it is no reason to neglect reading through the product disclosure statement to ensure you know exactly what you will be covered for.
As a general guide follow this:
Using an adviser may be more suitable if you:
- Want access to a wide range of products to give you greater choice.
- Want knowledge of the market to help you find cover suitable for your situation.
- Are looking for advice around life insurance inside and outside superannuation.
- Are after higher cover levels and greater range of features.
Buying directly may be suitable if you:
- Prefer no medical questionnaire during the application process.
- Prefer cover that can be put in place mostly online and over the phone.
- Want to know straight away if your application is successful.
- Want to review brands that offer combining involuntary redundancy cover as an option.
Australian consumers, it seems, are becoming increasingly confident in making their own decisions about which life insurance policy is best for them
According to TAL1 (An insurer that provides life insurance through both an adviser and directly to the consumer), the popularity of no advice life insurance in Australia has been steadily increasing in recent years.
Australian consumers, it seems, are becoming increasingly confident in making their own decisions about which life insurance policy is best for them, not just seeking advice from an insurance consultant. With the direct life insurance market continuing to expand, the popularity if this type of insurance in Australia is expected to increase further.
Reasons why more people are buying cover without advice
The reasons for this growth can be traced back to the benefits of no advice life insurance
- The quick and easy application process
- The straightforward and easy to understand policies
- No need for medical underwriting. Increased competition drives prices down.
What does this mean for advised products?
As direct life insurance continues to escalate its market presence, more consumers are starting to see it as a viable option for their insurance needs. This also means there is greater choice for consumers, with a larger range of products to choose from. However, there will always be a place for advisers in the Australian insurance industry. Adviser based life insurance often can fill the gaps that direct offerings don't cover e.g.
- Medical underwriting for pre-existing conditions
- Help with comparing products
- The ability to tailor your policy
- Help with the application process
In the past, direct life insurance products were quite simple and design and were limited in the level of cover that they were able to provide to applicants.
A closer offering to products based on advice
The popularity of purchasing cover direct in recent years has seen the design of direct products merge closer to that of those offered through advisers. As an example, Noble Oak allows applicants to take out up to $15 million in cover on their term life policy, a sum closely matched to products from companies with full underwriting. Put simply, applicants can now enjoy many of the same policy benefits and features when purchasing direct that they would if purchasing through an adviser.
In some cases, life insurance without advice can actually be more affordable than insurance purchased through an adviser. Direct life insurance brands adopt a number of approaches to the risk of insuring consumers with limited underwriting, which in turn helps them keep premium costs down. However, one thing to be aware of is the set type of cover that's provided with a direct policy e.g. it may not be sufficient for your needs.
Advised cover can be cheaper in some cases too
Additionally, some 'low-risk' individuals may even be able to get a cheaper policy with an adviser with cover that is tailored to their lifestyle.
1. Money Management 2016