Like all the most important things in life, getting the right life insurance policy is something to be considered with great care. After all, it serves the purpose of safeguarding the lifestyle and wellbeing worth preserving for your family.
Here’s a breakdown of the three distribution channels for life insurance that are available to choose from.
Life Insurance through Super
Superannuation members are often not aware that superannuation, in most cases, is a source of some form of life insurance (also known as ‘group insurance’). Most super funds will have automatic or default inclusions, offering a minimum level of cover in the event of death or total and permanent disablement, as well as cover for income protection. This cover can be amended or removed with a chat to your super fund.
Cover is usually provided under one group policy and is purchased in bulk, helping keep the costs low and deducted directly from your super account. It is nonetheless important to be aware of the limits of the life insurance cover within super, including whether it covers a standard default amount or whether you are able to select an amount you require.
To ensure you have adequate cover for you and your family, you should consider whether you need more than the default amount of cover in your super. If you do, there may be a number of options available, such as increasing the level of cover you have through super or by talking directly to an insurer or through a broker. As part of the decision-making process, you may also consider whether there are any expiry conditions on the cover or whether the terms and conditions on the policy in super are consistent or better than those that can be obtained through cover outside of super.
Your super fund often rolls over in the background as you traverse the workforce, but your circumstances may change over the years. That means you should review your super inclusions and policies at least annually to decide whether life insurance through super alone is enough to cover your current and future needs.
Direct Life Insurance
This popular approach uses more of a ‘DIY’ method, allowing you to research and compare all the life insurance policies yourself. This requires time to understand exactly what is being offered by the different policies, and to make thorough comparisons of the policies on the market.
You could start by conducting research using one of the many comparison websites available, while being mindful that these can be limited in scope in terms of the brands and insurers that they can provide you information about. Another option is to obtain a few quotes online or call to speak with a sales consultant directly.
Many policies are quick and easy to apply for once you have studied the Product Disclosure Statement of a product and landed on a level of cover to suit your needs. This is usually done online or over the phone, as can be the simplest method of the three since you are purchasing the product directly from the insurance company or one of its affiliates. However, this method does not come with any advice so you need to ensure your own understanding of the cover and make your own judgement about whether it is appropriate for you.
Ultimately, direct life insurance is an excellent option if you are comfortable with setting up the policy yourself and want to do so quickly, and prefer to take control of the application and approval process.
Broker-Assisted Life Insurance
A large number of life insurance policies for sale in Australia are only available through brokers (also referred to as financial advisers), who act on behalf of a customer to provide personal advice about purchasing insurance.
By distributing through brokers, life insurers can sell more complex products, with the expectation that a broker will take the time to educate their customer and ensure that the cover is suitable for them. There are often a lot more options attached to these products which allow brokers to specify which set of options are appropriate for their particular customers, and can in turn advise on this.
Although the price is comparable, the process of obtaining cover through a broker is generally much longer than the other channels discussed here. That is because brokers need to undertake a full advice process and will need to issue a Statement of Advice, which is legally required. The nature of the advice can vary from limited advice that is specific to the type of insurance policy you are enquiring about, all the way to a complete financial plan. It is important to be clear with your broker at the outset about what kind of advice you are seeking, so that you don’t end up paying for unnecessary services.
When it comes to life insurance, the choice is always yours. You may take the direct DIY approach or contact a broker for advice. You may even feel that the life insurance provided as part of your superannuation meets your unique needs for the time being. Regardless of the life insurance policy path you choose, remember to do your research and don’t undermine the value of a policy by focusing only on its cost.
Disclaimer: The content of this blog is intended to provide a general guide to the subject matter. This blog should not be relied upon as legal, financial, accounting or tax advice.