Where you get your life insurance will affect your overall cost, cover level, and benefits.
Purchasing life insurance through your employer or super fund often means getting a 'one size fits all' policy.
Using a financial adviser can help you find personalised cover.
Life insurance options
There are 4 main ways to get life insurance in Australia. Each has its own advantages and disadvantages, which you should consider based on your needs and circumstances.
Direct life insurance
Just like with car or home insurance, you can buy your life insurance by simply contacting a provider and starting off with a quote. This is usually the most straightforward way to get cover, as there's no middleman. The type of insurance you choose will have different levels of underwriting, which will affect how long your approval process takes. Some may require a quick phone call with a few basic questions, while others can be a lot more detailed, requiring you to do a medical or blood test.
Pros
No middleman: Buying directly means no additional fees outside your policy.
You call the shots: You can tailor your policy, including how much you insure for and which features you include.
Choice of premiums: You can choose to pay in stepped or level premiums. Stepped premiums tend to start cheaper but will increase over time, while level premiums remain the same for the length of the policy.
Cons
All on you: You're in charge of researching and understanding everything. Ultimately, whether you find a policy that fits your needs depends on the time and effort you put in.
Costly choices: Premiums are generally higher than retail or group insurance.
Pre-existing conditions: Not all conditions are covered automatically, and some might be excluded for a period or not covered at all.
Life insurance through superannuation
If you've got a super fund, chances are, you've already got some level of life insurance within your super. Instead of getting your own individual policy, you'll be covered under a single plan that covers all members of the fund. This is generally a 'one size fits all' type of life insurance, so there is generally limited variation in policy terms and cover options. Unlike other policies, your premiums are paid directly from your super.
Pros
Cost effective: It's often cheaper, because policies are bought in bulk by superfunds.
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.
Convenient: Premiums are taken directly from your super balance, so it won't impact your current cash flow. Not having to maintain a standalone policy can also mean less paperwork and admin.
Cons
Portability: If you change funds, your cover might end. Super funds are required to cancel insurance on accounts that are inactive for 16 continuous months.
Reduces super: Because your premiums are paid by your super balance, you'll accrue less interest and have less sitting in your retirement fund when you're ready for it.
Cover can be limited: The standard benefit amount is usually between $100,000 and $200,000. That may seem like a lot, but it's generally suggested that your life insurance is around 5 to 10 times your annual salary.
Life insurance through your employer
Getting insurance through your employer means you'll get a group life insurance policy similar to going through super. These are often lower cost due to bulk purchasing by your employer, but like buying life insurance through super, you'll have limited customisation.
Pros
Cost effective: Often cheaper thanks to bulk purchasing by the employer.
Automatic cover: You'll usually be automatically covered if you're an employee.
Employer pays: If it's part of your employment benefits, your premiums may be paid partially or fully by your employer.
Cons
Portability: If you leave your job you could lose your cover. Some insurers will let you keep your cover, but it can come with a higher premium.
Lower cover: The standard benefit for group life insurance policies is between $100,000 and $200,000. This may not be enough for you and your family's needs if you pass away.
Retail life insurance
Retail life insurance is cover you buy with the help of a financial adviser. These professionals will assess your financial situation and help you find a policy that suits your needs. What you'll get is personalised service and expertise, which can make it easier to find a life insurance policy that's tailored to your specific circumstances. Typically, this also means a fully underwritten policy that requires a thorough application process.
Pros
Reliable and secure: You'll be fully assessed both medically and financially before your application is approved, which gives you assurance that you should be fully covered when it's time to make a claim.
Access to more complex products: Some advisors will be able to find you policies that are customised exactly to your needs. Many of these products won't be available if you go through other channels.
Expert advice: Whether it's a pre-existing condition or a dangerous occupation, advisers have the expertise to help you understand your needs and what you should be looking for in a life insurance policy.
Cons
Portability: If you leave your job you could lose your cover. Some insurers will let you keep your cover, but it can come with a higher premium.
Lower cover: The standard benefit for group life insurance policies is between $100,000 and $200,000. This may not be enough for you and your family's needs if you pass away.
Comprehensive checks: Retail life 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 adviser, receiving a statement of advice, and finally setting up your life insurance policy, can take a lot of time. Expect periods of up to 8 weeks before being insured.
Side by side differences
Here are the key differences between the different channels of getting life insurance:
Differences
Direct
Super
Employer
Retail
How do you buy a policy?
Online or on the phone
Included for members
Part of your employment package
Set up by your adviser
The application process
Depends on the type of insurance you choose
Usually guaranteed acceptance
Usually guaranteed acceptance
Typically a background and medical check
Level of cover
You make that decision
Automatically set by the group policy
Automatically set by the group policy
Decided by you and your adviser
Cost
Varies widely depending on type of life insurance
Usually cheaper than policies bought individually
Usually cheaper than policies bought individually
Not necessarily cheaper, can include an adviser fee/cost
How are premiums paid?
Directly by you
From your super balance
Employer may pay partially or fully, or it can come out of your salary
Directly by you
Choosing your beneficiaries
You nominate them when you take out a policy
You contact your super
You inform the insurer or your work
You decide with consultation from an adviser
Tax treatment
Premiums are not tax-deductible, benefits can be (excluding income protection)
May offer tax benefits or concessions depending on the fund
May offer tax benefits or concessions depending on the insurer
Premiums are not tax-deductible, benefits can be (excluding income protection)
Do they cover pre-existing conditions?
Higher premiums required, or conditions can be excluded
Often yes
Often yes
Higher premiums required, or conditions can be excluded
Portability
Maintain your cover by paying premiums
Switching super may void cover
Leaving your job risks losing cover
Maintain your cover by paying premiums
FAQs
Getting life insurance through super can be a smart choice for many people. It often comes at a lower cost and can eliminate the need for medical checks, which is a big plus. However, it usually only offers a basic level of cover that might not fit your needs. It's worth checking with the individual life insurance policy to see if it's right for you and your family.
Besides how you get it, the main difference is the level cover you'll receive and how much it'll cost you. Group insurance policies are 'one size fits all'. You won't be able to tailor your cover to circumstances, but it is usually the more cost-effective option. On the other hand, with retail insurance, a financial advisor will work with you to find a policy that matches your needs.
Retail life insurance is cover you buy through a financial adviser. This type of insurance is all about personalisation – a professional will communicate and advocate on your behalf with insurers to find a policy that fits your unique circumstances.
With a background in writing across education, Web3, and finance, Cameron’s mission is to create content that speaks directly to readers in a way that’s easy to understand, helping them navigate complex topics with confidence. Cameron studied a Bachelor of Commerce, Economics and Marketing at Macquarie University, graduating in 2019.
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