Direct vs Retail Life Insurance — Which is The Best Option?

Direct vs Retail Life Insurance: Which Is The Best Value Option?

When it comes to getting the right kind of life insurance, it is important to choose the one that can give you peace of mind and guarantee that your needs are covered. Choosing the right one for your needs and budget, however, can be a bit tricky. Aside from the fact that the enormous range of life cover policies on the Australian market today, the fine print of these contracts can be difficult to understand and compare.

Let’s take a look at direct and retail life insurance, for example. As two of the most popular life cover types, direct life insurance and retail life insurance do have a lot of similarities. However, the two are also different in more ways than one. Knowing the difference could be the secret to getting reliable and affordable life insurance.

Between direct and retail life insurance, which offers the best value to consumers? When you look at the way each option works, the answer is pretty simple. Canstar research has shown that direct life insurance can be up to 50% more expensive than retail or advised life insurance. Considering the price of premiums, ease of processing claims, and the added security of your policy, retail life insurance also offers the best selection of benefits.

Read on to find out why retail life insurance is the way to go. We’ll explore how it compares to direct life insurance and other similar life cover options available in Australia today.

What is Direct Life Insurance?

Direct Life Insurance is life cover that can be purchased directly from the insurance provider. This means that no other parties will be involved in the purchase of the policy. Direct insurance companies are known for offering life cover with no or very minimal requirements. While other types of life cover require medical assessment, direct life insurance is a lot less complicated. Some of the most popular policies that can be purchased directly include life cover, income protection cover, trauma cover, or any specific occupation insurance policy.

Pros and Cons of Direct Life Insurance

One of the selling points of direct life insurance is the ease and simplicity of acquiring it. Direct life insurance can be purchased both offline and online, and applicants will not be required to present any medical information. Instead, all medical documents will only be required when a claim is made later on.

One disadvantage of getting direct life insurance is that you will be doing all the work. As there will be no one to negotiate or process the necessary documents for you, you will have to do basically everything – from researching the best insurance provider to thoroughly reading the fine prints of the policies on offer.

The lack of upfront documentation means you don’t have any certainty a claim will actually be paid out when you need it the most. Direct life insurance also has the shortest lifespan, with many policies terminating when you reach the age of 70.

What is Retail Life Insurance?

Retail or advised life insurance is cover that you can purchase with the help of a financial or insurance adviser. This means that you will not be directly buying from the insurance provider. Instead, you’ll have a professional at your financial services firm assisting you in the process.

Unlike direct life insurance, the process of securing retail life insurance cover can be longer and a bit more thorough. To apply for a retail policy, you will be required to share your medical records as you will be assessed based on your previous and current medical conditions.
Different kinds of insurance such as life cover, income protection cover, trauma cover, or any occupation cover can also be purchased as retail insurance.

Pros and Cons of Retail Life Insurance

Many applicants prefer retail life insurance because of its reliability and the added security that it offers. As you will be assessed before your application is even approved, there is an assurance that you will experience few or no problems at all when eventually making a claim. When life insurance is all about security, choosing retail life insurance gives you the confidence that you’re actually covered.


The downside of buying retail or advised plans is that you will be required to share your medical records – not just with the insurance provider, but sometimes with the financial adviser who will be processing the documents for you. Of course, financial advisers are professionals who are held to the highest standards of client privacy, so it’s part of their occupational and ethical obligations to maintain the security of your information.

Direct vs Retail Life Insurance: What Is The Difference?

As we’ve clarified, direct life insurance is purchased straight from the provider, whereas retail life insurance is facilitated through a financial services provider.

When choosing between direct and retail life insurance, it is wise to understand the advantages and disadvantages of both options. You have to take into consideration the price, the application process, and the overall value of the product – which is a much bigger concept than just the cost of premiums.

With that said, let’s take a look at the key issues that you will most likely be dealing with when planning to buy life cover.

Availability

Direct life insurance can be purchased through different channels, making it easy to access. You can buy direct life insurance by logging on to a computer, by phone, or by paying the insurance provider a visit. For retail life insurance, you do not have to do any of these, as your financial adviser will be arranging the life cover for you.

Application Requirements

Direct life insurance companies do not require you to present your medical information during application. This also means that you are not underwritten and all medical documentation will need to be supplied at the time of making a claim. Simply put, there is no assurance that any future claims will be approved, especially where underlying medical conditions are present.

Retail life insurance companies, on the other hand, require their clients to present medical information for assessment. Once the assessment is completed and before the policy takes effect, you will be underwritten. That means that you will already know what is and isn’t included in your policy. That also means that payment is guaranteed once a claim is made later on.

Cost

As there are no middlemen when it comes to purchasing direct life cover, most people assume that it is actually more affordable. However, it is important to note that this is not always the case. Prices of these policies can vary a lot, both between providers and over time, and factors need to be considered based on the needs of specific clients. Believe it or not, direct insurance can actually be up to 50% more expensive than retail insurance. Why is this? Competitive rates are usually offered by insurance providers to financial advisers and planners so that, in turn, can offer them to their clients.

For retail life cover, with the help of a well-trained and well-experienced financial adviser, you’ll learn about different providers, policies, and features that otherwise wouldn’t know about. Taking into consideration your current financial capacity and the type of cover that you need (and when you need it), the financial adviser can help you come up with a sound decision to suit your lifestyle. That means you will be able to choose the right policy (or provider) for your needs, your budget, and your specific preferences.

Expiry

Another important factor to consider when choosing between direct insurance and retail insurance is the length of the policy. Generally, direct insurance policies have shorter lifespans. While retail insurance can get you covered until the age of 99, direct insurance policies usually expire by the time you reach 70. This is definitely bad news if you still have unsettled payments after your policy expires.

Is direct life insurance cheaper?

No, not necessarily. As a matter of fact, Canstar research has shown that direct life insurance is often the more expensive option and is certainly not the best value choice either. Taking into consideration the monthly premiums, the total value, and the length of coverage, it is safe to say that retail or advised life insurance is actually a lot less costly. In fact, based on research, direct insurance policies were priced almost twice as much as retail life insurance policies.

In addition, with advised life insurance cover, clients only pay for the policies they and their family actually need. Since financial advisors must act in your best interests, you’ll get their sound advice about what’s worth investing in, and they’ll understand how it fits into the bigger picture of your finances.

For direct life insurance covers, clients may actually end up paying for cover that they don’t actually need. Or worse, the type of cover that they need is actually not included in the policy that they’re paying for. When you have to do the research and read the fine print yourself, it’s extremely difficult to understand exactly what you’re getting, and you may miss out on opportunities you weren’t even aware about.

Should I buy life insurance direct or through an adviser?

Ultimately, it’s wise to seek advice and help from professional and experienced financial advisers to make insurance decisions. Not only do they know the tricks of the trade, they can also help you understand details and features that could come in handy.

Aside from that, with retail or advised insurance, you can sit back and relax as your financial adviser makes the key arrangements, minus the stress. When you’re making such a big decision for your family’s future, it’s worth getting a professional opinion and tapping into their industry knowledge for the best possible results.

Most importantly, studies show that advised or retail life plan is significantly cheaper on the whole.


Related Questions

What is advised life insurance?

Advised life insurance is another term for retail life insurance. This is the type of insurance that is more thorough upfront, safer to use, and will keep you covered longer. Advised life life insurance is purchased with the help of an experienced financial adviser who can recommend the correct policies for your needs, and answer all the difficult questions you might have about life insurance.

What is the difference between retail and wholesale insurance?

Retail life insurance refers to policies that you can buy with the help of a financial or insurance adviser. During application, your needs and financial condition will be taken into consideration. Wholesale insurance, on the other hand, refers to covers for small employer groups which are not qualified to be considered as group cover. Also known as franchise insurance, wholesale insurance covers the whole group, with each individual member given his or her own policy.


This article is provided as general information only and does not consider your specific situation, objectives or needs. It does not represent financial advice upon which any person may act. Implementation and suitability requires a detailed analysis of your specific circumstances.

Matthew Rutter, Director/Head Financial Advisor of WVPC

Matthew has a wide ranging background in business, finance, taxation and accounting with over 25
years’ experience, firstly as an Accountant before becoming a Financial Planner. Matthew has been in
the Financial Planning Industry since March 1998 and has been the principal of his own financial
planning practice since 2003.

Matthew has studied a Bachelor of Commerce degree from Newcastle University majoring in Financial
Accounting and the Diploma of Financial Planning from Deakin University. Matthew is a Registered Tax
Agent and is a member of the National Tax & Accountants Association (NTAA).

Matthew has particular expertise in the areas of retirement planning, superannuation, investments and
insurance. His emphasis is on building a professional, integral and lasting relationship with clients with
the objective of assisting them to achieve their financial and lifestyle goals.

 

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