We often get asked this question, which type of policy is best for me, should I take out a policy through a group insurance scheme (i.e. superfund or my employer) or should I take out an individual policy which I have sourced through my own means. There are a number of differences in the types of policies and considerations your need to review to find the solution that is best for you. Here we have provided you with some great information to help you in navigating this question.
Firstly you need to understand the different categories of life insurance options currently available in the Australian market which we have illustrated for you below:
As you can see form this brief illustration in general “retail” policies are favoured over “Group” and “Direct” polices however this is not always the case as each person’s circumstance is different to everyone else’s therefore it is always best to understand your options and decide which one best meets your requirements.
Compare Retail Life Insurance Policies
- Flexible Retail Policies
- Pay Premiums with Your Super Fund
- Combined Policies Available
- Tax Deductible Premiums
If you still want to understand more about the differences between Group and Retail polices we have put this great resource together for you to read!
Alternatively if you would like to further understand the differences between the different types of individual polices (Retail vs Direct) available we have put together this amazing resource which is called 10 things you need to know about direct life insurance, here we compare premiums between a number of “retail” and “direct” policies, review premium structures, exclusions and many more points you should consider before you deciding on what type of individual policy you prefer.
Group vs Retail Life Insurance
There are a number of considerations you need to be aware of when making this decision.
What is Group Life Insurance?
A Group Life Insurance policy is cover that is designed to cover multiple people under the one policy. It is generally available for the corporate sector or superannuation funds. In most cases, the people covered must share a commonality – either employees at the same company or members of the same super fund.
*You cannot elect to take out group cover as an individual.
When would Group Life Insurance be available?
Group Insurance may be available in the following ways:
While group insurance is designed to be offered to thousands of members such as in a super fund, select policies may be able to cater for companies with as little as 20 people.
What cover is available through Group Life Insurance
Generally the following types of cover are available:
Built-in features of Group Life Cover
The optional benefits available will vary between insurers but may include:
Underwriting and Automatic Acceptance
Generally a new person joining a group insurance policy will not be required to undergo underwriting and will be eligible for cover up to Automatic Acceptance Limit (AAL).
The AAL is a set if criteria or conditions that you must meet in order to be eligible for acceptance. If you want cover above the AAL or you do not meet the criteria, you may be required to submit additional medical information for underwriting.
Comparing Group and Retail Life Insurance
The key difference between group and individual insurance is that an individual insurance policy is taken out by an individual and is customised to suit their situation. This is compared to a Group policy which is taken out by an organisation on behalf of its employees or members and is often a one size fits all approach.
Retail Insurance is cover that provided by some of the major life insurers in Australia. It is generally only available through a financial adviser/comparison website.
These products are generally fully medically and financially underwritten and provide greater flexibility, customisation and additional policy options compared with Direct or Group Insurance.
The advantages of Retail Life Insurance policies is that they can be customised in the following ways:
You can choose the amount of cover so it suits your circumstances and budget. Typically insurers have no maximum cover limit.
A number of premium styles are available:
When taking out a retail policy, you can generally choose a number of different ownership structures:
If you are looking at taking out multiple cover types, you generally have two options:
Take out a combined policy where multiple cover types are combined into the one policy with one premium i.e. a combined life, trauma and TPD policy.
Stand Alone Policy
Take out individual policies for each cover type i.e. stand alone life, trauma, TPD and income protection policies.
One of the major advantages of an individual retail policy is the ability to customise it to suit your needs, including choosing adding any policy options.
Typical policy options for life insurance include:
Select insurers offer free child cover of up to $10,000 covering death, terminal and critical illness. You can generally also elect to take additional cover out for your children of up to $250,000.
Accidental Death Insurance
Pays out a benefit if death is caused by an accident. This can be a stand alone policy or it can be an additional option to a life insurance policy.
Business Future Insurability
Business Future Insurability allows you to increase your level of insurance if a significant business events occurs.
Pays 1/30th of your monthly benefit for each day you are confined to your bed during your waiting period.
Day 1 Accident Cover
If you are totally disabled as a result of an accident and continue to be totally disabled for at least 3 days, you will be paid 1/30th of your monthly benefit each day you are totally disabled.
Increasing Claims Benefit
If you go on claim, your monthly benefit will increase, allowing your benefit to keep up with inflation.
Lump Sum Benefit
If you are totally disabled to an extent that you meet the totally and permanently disabled definition, you may elect to receive a lump sum rather than monthly benefit.
Superannuation Contribution Option
This option allows you to insure an additional 5% of your income to go towards superannuation contributions.