What you need to know about buying life insurance direct

Life Insurance is one way to protect your family and the lifestyle you’ve worked hard to build, if you pass away or are diagnosed with a terminal illness. Australians generally access life insurance in one of several ways, including:

• directly from a life insurance provider
• through a financial adviser
•  through their superannuation fund

Buying Life Insurance directly from the Insurer – as instead of through a financial planner or broker – may be a more convenient option for some people. And while many people can benefit from getting independent financial advice, there are also some situations where you may want to do it yourself. 

We explore the pros and cons of each option to help you decide which avenue is best for you. 

What is direct life insurance?

Direct life insurance lets you apply for cover directly with a provider, rather than through a financial adviser or your superannuation fund. Depending on the provider, you may be able to request a quote online and apply over the phone, making the process simple and convenient.

Common misconceptions about direct life insurance

With growing popularity and demand for direct life insurance in the Australian market, common misconceptions have emerged. These include:

• It’s more expensive
• There are more exclusions or unfair terms, particularly concerning exclusions for pre-existing conditions
• Premium rises are poorly explained
• There are long claim periods and high rates of claim rejections

These concerns can make direct Life Insurance seem more complicated than it is.  However, the Life Insurance Code of Practice helps set industry standards to ensure products provide genuine benefits to customers, advertising is accurate and suitable for its audience, and claims practices meet certain minimum requirements including a maximum time period for assessment. By comparing policies, reading the Product Disclosure Statement and choosing a trusted insurer, you can better understand what is covered and decide whether buying life insurance directly suits your needs. 

Why buy life insurance directly from the provider?

Direct life insurance can provide a simple and convenient way to apply for cover. You deal directly with the provider, without needing to attend in-person meetings or schedule appointments with a financial adviser, which can save you time.

Depending on the provider, you can request a quote online and apply over the phone, without completing lengthy forms or undergoing a medical examination or blood test. You may also be able to choose your level of cover, payment frequency and optional benefits to suit your needs and budget.

Benefits of direct life insurance

Features and options

Buying life insurance direct gives you access to information and support from the provider. You can learn more about the available cover levels, payment options, optional benefits, exclusions and claims process, helping you understand the policy and decide whether it suits your needs.

Speed

Direct life insurance may have a faster and easier application process time. You can often get quick responses to questions and quote requests without having to undergo medical or blood tests or fill out long forms. Plus, you work directly with the provider to learn about their products, discuss terms and conditions, and finalise your application. Consulting with a financial adviser may take more time when it comes to researching products, contacting insurers on your behalf, and getting back to you after the application is assessed by an underwriter.

Cost

Buying life insurance direct may help you avoid the cost of receiving personal financial advice or having a comprehensive financial plan prepared. However, the total cost of cover will depend on the insurer, policy features, level of cover and your personal circumstances, so it is important to compare your options.

Freedom and control

Buying life insurance direct allows you to deal with the provider yourself, without going through an adviser or broker. This can make the process less time-consuming, as you can contact the provider directly for information and support, manage your policy and make changes where permitted. It may suit people who are comfortable researching their options and making their own decisions about cover. 

Life Insurance through superannuation

Many Australians have some level of life insurance through their superannuation fund. Premiums are generally paid from your super balance, which can make cover convenient to maintain.

However, the amount of cover included with your super may not always reflect your personal circumstances or financial needs. It's worth reviewing your cover from time to time to understand what's included, who is covered and whether the benefit amount is appropriate for your situation.

Some people choose to keep their superannuation cover and also take out a separate direct life insurance policy to provide additional financial protection, depending on their needs.

Life Insurance through a financial adviser

Getting life insurance through a financial adviser may suit people who want personalised advice about their insurance needs as part of a broader financial plan.

An adviser can help explain different policy options, recommend suitable levels of cover and assist with the application process. Financial advice may involve fees, and advisers may recommend products from one or more insurers depending on the services they provide.

For people who prefer to research their options independently, buying life insurance directly from a provider may offer a simpler application process.

What you need to consider when buying life insurance direct

If anyone relies on you financially, you should consider protecting them and their future with life insurance. It assists in covering the inevitable financial consequences that follow someone passing away and can help those left behind deal with immediate expenses and future financial obligations. But before you jump in with direct life insurance comparisons and quotes, check this list to ensure you can make an informed decision that best suits your situation.

How much life insurance cover do you really need?

To help determine the amount of cover you may need, think about how much money your family would have left if you were to pass away and be unable to provide financial support. Consider money available through your superannuation, shares, savings and existing insurance policies.

Calculate how much cash your family would need if the worst were to happen. Take into account the size of your mortgage and any other debts, as well as childcare, education and other recurring bills. When you have this information, you are able to evaluate quotes factoring in the payout figure required to cover these costs and see what works within your budget.

Does the insurer you are leaning towards have optional add-on benefits such as serious illness cover or children’s insurance? In some cases, these may help tailor life insurance to suit your needs and budget.

How much life insurance can you afford?

Before you commit to a life insurance policy, make sure its premium payments suit your budget. Some providers offer flexible payment options where you can choose to pay premiums fortnightly or monthly at no extra cost – whatever suits you best.

You can also keep your premiums manageable by choosing a level of cover to suit your life stage. For example, if you are single and without financial dependants, there’s no need for cover that would provide for a family with kids. You may choose to opt for cover that can help keep you financially independent and comfortable if you are diagnosed with a serious illness and unable to work. If your situation changes, you can reassess your cover level to suit.

Stepped vs level premiums

You may have the option to choose between a stepped or level premium, so make sure you understand both concepts before committing. A ‘stepped premium’ will increase every year as you get older but will most likely be cheaper in the beginning. Understand what your premiums will become over a longer period of time (e.g. five to ten years) when considering a stepped premium to ensure it fits within your budget over time.

A ‘level premium’ doesn’t change as you get older. But it will most likely be more expensive in the beginning than a stepped premium, yet cheaper than a stepped premium as you get older. Check with your insurance provider to see if your level premium will increase over time due to a number of factors, including indexation of the benefit amount or fee changes. Also bear in mind that your insurance needs may change over time. For example, you may need a higher level of cover when you are younger and have fewer financial assets of your own to fall back on. If you anticipate that you will need lower levels of cover later in life, a level premium may not be suitable for you.

Insurance provider quality and credibility

Do your homework on the insurer you are considering getting a policy with to learn more about its experience and reputation. Industry awards and associations with the industry code of practices are good indicators of reputation.

Knowing these five considerations up front may be the difference when it comes to making a simple and informed decision when choosing a life insurance policy. A policy that caters to you and is within your budget will give you peace of mind that if something were to happen to you, your family can be financially protected.

Learn more about Real Life Insurance and request a quote online now with no medical or blood test needed to apply.