How a Life Insurance Broker Can Save You Money

Finding the right insurance policy to protect you and your family can be stressful because you don’t want to choose the wrong policy, that doesn’t cover you adequately. One of the best ways to make your choice as easy and painless as possible is by working with a life insurance broker.

What is an insurance broker?

An insurance broker is a specialist in insurance that’s able to provide you expert knowledge, cutting through the industry jargon, so you can easily understand your options.They can often access a number of insurance companies to help you find cover at an affordable price, helping you gain a better understanding of the cover, benefits and features available from differing companies.

You’ve already decided to buy insurance; now the question becomes how much time you are willing to spend and how do you make an informed decision while finding value for money. A top insurance broker should guide you toward finding the appropriate information quickly, simplifying the decision making process.

Life Insurance Direct is a leading online life insurance broker, helping customers all over Australia compare policies and premiums with the aim of enabling you to decide which policy fits your lifestyle and budget best. We help families understand this options and how to find affordable cover and provide an easy over the phone application process.

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We want to empower you to make an informed decision regarding choosing cover that will protect your lifestyle and loved ones. This article will help you decide between using a broker or buying directly, as well as explaining the pros and cons of each.

What does an insurance broker do?

An insurance broker can give you access to a number of insurers. They typically spend a lot of time in training, understanding the terms and conditions and the ways in which to optimise your policy structure to match your unique requirements and budget. They spend a lot of time searching for the best match, while also assisting with claims and general policy administration.

Benefits of a personal life insurance broker

  • A broker has the expertise of knowing which policies are currently strongest in the market.
  • They generally have access to a number of insurers, giving them an easy way to find affordable pricing.
  • They help you understand what options are available.
  • They demystify the industry jargon and fine print.
  • Will explain to you what risks you may face and the ways you can try to mitigate the risks.
  • They dig deeper into the benefits, features and exclusions of a policy, to provide you with a comprehensive picture.
  • They’ll guide you through the underwriting/application process.
  • Using a broker provides you with the knowledge needed to make a better-informed decision.
  • In general, they assist clients with lodging and handling a claim.
  • Provide ongoing administration support and fielding of enquiries throughout the year.

Using a life insurance broker vs. buying directly

Life insurance companies prefer to sell you insurance directly and not pay a brokerage fee, which might indicate that buying insurance via a representative is more expensive, but this is a myth.

Contrary to popular belief, buying directly from an insurer is generally 50 – 100% more expensive than purchasing from a broker. Because insurers are in constant competition to win this large market segment, they need to provide competitive premiums along with strong policy features or risk losing out.

Brokers have access to extensive research which makes comparing policies side by side very easy, so insurers have to ensure their policy stacks up, or they won’t get any customers from this market segment!

Thus, brokers generally receive competitive rates with strong policy features for their clients.

Exclusive Research compared 32 Brands premiums side by side (Direct vs. Advised vs. Super Funds) which reveals the channel you choose to purchase your policy can have a major impact on the premium you pay. You will see policies offered by brokers/specialists are often cheaper compared to Direct policies.

Pros and cons of purchasing directly from an insurer

Pros Cons
Simple application process. Over the phone, online or directly through your bank. Poor claims payment record,with a 71% higher chance of your claim being declined than when purchased through a broker.
Minimum or no medical information required at application time. If you have a pre-existing condition you are more likely to be declined, referred or loaded.
Limited or no underwriting during application. Generally, policies are only fully underwritten at claim time, making premiums more expensive and exclusions more likely.
The agent will make every effort to sell you the policies they have. You are limited to purchasing only their products, which might not be getting value for money or the cover you need.
Has exceptionally thorough knowledge and understanding of their company’s products and services. The absence of a specialist means you have to review and compare products yourself and you’ll not have help with the application process.
No need to talk to a broker, which may save you time at application stage. You might not get what you wanted and the cover your family expected or required.

Pros and cons of using a broker

Pros Cons
Better access to a greater number of life insurance companies and a diversity of policy options. It can be overwhelming hearing all the policy options, benefits and structuring options available.
Easier to find good value with less effort, as they are motivated to keep you happy and save you money with good coverage. You might feel the broker is pressuring you into a decision, if this is the case find another broker.
Brokers have extensive experience and access to detailed research on premiums, features and policy definitions that makes comparing extremely easy for you. Some only work with 1-2 companies you may want to see if this works for you, but most will work with 5-10.
They work for you, not for the company and will thus generally put your interest first and find a policy that meets your requirements. They can misunderstand your requirements and not deliver what you expected but this can often be addressed before you proceed with a policy.
Generally no additional costs to you. Brokers generally get a fee from the companies they work with. Brokers can charge a fee, therefore check upfront if they will be reviewing their FSG.
Most representatives will help you in claiming from your insurer and fight for you to get what is owed. Having an experience broker in your corner is not to be underestimated! They are extremely experienced and can help get your claim processed appropriately.

How to choose a life insurance broker

Insurance might only be one part of planning for your financial future, but it is a very important part and should receive the appropriate level of consideration and thought. Remember, your insurance needs will change, so you should choose a life insurance specialist that will help you assess your insurance needs every few years.  There are 4 important steps to consider before starting your search.

First, you need to understand your financial situation, including how much cover your dependants will need should you die suddenly. Ask yourself, do you have any outstanding debts or mortgage payments and how much money would your family need in order to maintain their current lifestyle?

Secondly, consider which type of personal cover you should be looking for, for example, TPD cover, Trauma Cover or Income Protection.

Thirdly, you should take your health into consideration. Life insurance premiums are usually based on your height, weight, age, smoking status, medical history and lifestyle habits (pastimes and occupation).

Fourthly, it’s important you know the difference between insurance brokers’ ability to provide information, so you know what type of advice you can expect to receive. You generally have two choices when choosing a life insurance broker.

number-1Personal advice

Personal advice is where you will be asked to complete a detailed fact find, which includes your personal needs and circumstances, as well as a detailed account of your assets, savings, liabilities and income. You will usually be charged additional fees for this service. However, if you need your cover personalised and would like a personal recommendation, then you might want to see a financial adviser providing personal advice.

number-2General Advice

This type of broker does not take your personal finances and objectives into consideration, however, in most cases, they will be able to meet your requirements by providing you factual and general information which then allows you to make a decision on how you want to proceed.

Although a broker providing personal advice can recommend a policy that might directly fit your current needs, it is a lengthy process, and your circumstances will likely change every few years. It might be worth considering a broker that can compare and offer products and pricing outside their respective company.

How much do brokers charge?

Generally you don’t pay anything more than what the policy is worth as brokers are paid a brokerage from the insurers they use. However, if they do charge anything they will inform you of this upfront.

Why use Life Insurance Direct?
Life Insurance Direct is one of Australia’s leading Life Insurance Brokers and has been featured in many prestigious media outlets, like Financial Review, Smart Investor, Wealth Professional and Professional Planner.

Benefits of using Life Insurance Direct as your broker

  • Free online comparison: We don’t compare policies on price alone because insurance companies differ in what they offer. We compare the premiums, features and benefits of policies from up to 10 leading insurers to ensure you get great value.
  • Our specialists are extensively trained in decoding insurance contracts and will provide you with all the relevant information so you can decide which policy suits your needs best.
  • We provide you with more options at lower price points. No hidden fees, we receive a commission from the insurer, you pay us nothing.
  • We also provide you with a dedicated claims team, who will help you during your claims process, providing you support when you need it most.
  • Exclusive discount program: Get instant access to amazing discounts of up to 50% off big brands.

If you have any questions about the different types of life insurance policies available and which one might suit you best, feel free to contact us anytime or fill in the quote form above and one of our specialists will contact you as soon as possible.

Author: Russell Cain
Published: May 15, 2018

Ask an Expert?


  • Diane Kirch |

    If I use an Insurance Broker do they stay with me for the duration of my policy to ensure it is still current for my situation?

      Russell |

      Hi Diane

      Yes, generally speaking your broker would stay with you for the duration of the policy should you wish them to. Most brokers will also offer a yearly review service where they review your policy for you every year, and or make themselves available to you throughout the year if you have any changes your require to your policy or lodge a claim. Therefore it would be important for you to tell them what has changed and what additional cover and or changes you may require.

      If you would like to discuss your requirements further please call our team on 1300 135 205.

  • Jan osborne |

    I have been advised that if I cancel my term life insurance (annual prepaid) I will get a pro rata refund of the remaining months less stamp duty, but before I cancel I want to know what approximate amount of stamp duty I will pay? Is it a percentage of the annual premium (1420.00). If so what % is it please?
    My policy is for $A100,000 up to my 100th birthday and I am currently 68 if that is relevant.

      Anneke |

      Hi Jan.

      If you cancel a term life insurance policy, where you paid your premiums annually in advance, you’ll generally receive a pro-rata refund. However, I am not aware of the removal of the stamp duty fee.

      Before you cancel your policy, you might want to contact your relevant insurer so they can provide you with clarity on what to expect in regard to a refund, as this is not what we typically see.

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