Think HBR

Life insurance – you get what you pay for

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Michael Williams
JSA Group
There has been significant growth in the life insurance market over the past decade. You can purchase life insurance much more easily but not all life insurance products are the same. There are traps for the unwary.
There are three main ways to obtain life insurance: through a financial adviser (most common), as part of superannuation, or “direct” (least common, but growing, represents 11.4% of Australia’s overall risk insurance market as at the end of 2013.¹ ). A financial adviser gives you personal advice and makes a recommendation based on your individual needs and circumstances. Buying direct means you purchase life insurance direct from a life insurance company or their representative. This can be over the internet, in a retail sales outlet, or over the phone.
The types of cover offered through each of these channels can vary considerably and each serves a different type of customer and their needs. Some people may have simple or modest needs and will never engage the services of a professional adviser. While others have more complex needs and/or would like help from someone who is qualified to give advice to recommend the right cover. Cover offered by a financial adviser will
usually be much more comprehensive and tailored to a person’s specific circumstances.
Key features to look for in any policy include:
  • What exactly is covered under the insurance?
  • Are there any limitations and/or exclusions?
  • Whether the policy offers Worldwide Cover?
  • Does the policy include guaranteed renewability?
  • Will the policy provide a Guarantee of upgrade?
When deciding whether to buy direct or to use a financial adviser, you also need to consider:
The complexity of the cover:
  • TPD – own occupation versus any occupation definitions
  • Income Protection – what is the waiting period / benefit period attached to the policy?
  • Trauma cover – is this a linked policy or a standalone policy
Ongoing maintenance:
  • Is the cover held in the right entity?
  • Will the insurance proceeds be paid to the correct place in the event of a claim?
  • Are all members of a business and their spouses adequately protected?
If you are purchasing cover direct, you need to be aware of the detail and what you are actually buying. What may appear to be good cover or a great price may in fact be quite different. When there are so many variables in obtaining cover it is important to engage a qualified professional.
And lastly, when it comes to price, if it seems too good to be true, it probably is. If you are comparing two policies offering the same cover and one is half the price of the other, check the detail, as you may not be comparing apples with apples and you may not be covered when it comes time to claim.
For further information contact JSA Group on (02) 4908 0999, email or visit
This article is intended to provide general information only and has been prepared without taking into account any particular person’s objectives, financial situation or needs (‘circumstances’). Before acting on such information, you should consider its appropriateness, taking into account your circumstances and read any applicable Product Disclosure Statements.
Michael Williams JSA Michael Williams
is a Director and Adviser at the Hunter-based JSA Group. Michael is a Certified Financial Planner and Member of the Financial Planning Association. He has degrees in finance and mathematics as well as post graduate qualifications in financial planning.