How to save on life insurance
Providers advertise heavily on day-time television, but are they really offering a bargain?
Risks: The price survey assumes that applicants are in good health.
Most people are used to thinking if they buy something online they will get it cheaper than buying the same thing at a shop. However, when it comes to life insurance, buying directly from the insurer is usually the most expensive route, not the cheapest a survey by researcher Canstar shows.
Life insurers advertise heavily on day-time television, but usually the insurance will be cheaper through a superannuation fund or through an adviser. Buying directly from an insurer online or from their call centre can cost twice as much as buying though a life agent, financial adviser or a super fund.
“The main trap with the direct life is there may be a pre-existing condition exclusion.”
Paul O’Conner, Canstar
Canstar obtained quotes on $500,000 worth of term life insurance for eight people. The insurance is for death cover only and not for total and permanent disability. For white collar workers, buying the insurance through a super fund was always the cheapest option.
For example, a 35-year old white-collar male would pay a premium of $279 a year through a super fund, $351 through an adviser and $537 if bought directly from an insurer. The survey shows that blue collar workers pay more than white collar workers for life insurance bought through a super fund, at least through the three large industry super funds surveyed.
And surprisingly, while life insurance for a blue-collar worker though a super fund is cheaper than buying directly from the insurer, it is not as cheap as through an adviser.
However, the survey has its limitations. It assumes, for example, that everyone is in good health and all of the applications for insurance are accepted.
Paul O’Conner, the manager of wealth data at Canstar, says many large super funds have automatic acceptance up to certain limits of cover regardless of the medical history.
Though premiums for white collar workers with super funds are the cheapest, the premiums through super funds have been increasing, O’Conner says. And as well as being expensive there is another potential trap with direct life insurance.
“The main trap with the direct life is there may be a pre-existing condition exclusion,” he says. “With large super funds there are usually those automatic acceptance levels,” O’Conner says.