Combined Life Insurance: Linked vs Standalone Cover

Combined life cover could help you save on your insurance by bundling several cover types in one policy. These can combine life insurance, TPD, trauma cover and income protection. However, you need to be aware of the pros and cons as well as how claiming might affect your payout before deciding whether a linked or standalone policy is best suited to your requirements.

Published August 23, 2021

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The Difference between standalone and combined cover

Linked Cover

Bundled cover is a policy structure where several types of lump-sum coverage is combined into one policy with a single premium. These policies generally cost less, because if any benefits are paid out from one type of cover, the other benefits available for all covers attached to that specific plan will be affected.

Pros

  • Simplified policy management.
  • Premiums are generally more affordable.
  • Less paperwork.

Cons

  • Combined cover may no longer meet your requirements as your circumstances change.
  • Your other benefits decrease if you claim from one cover type.

Standalone Cover

These types of policies are typically a single policy with a single premium. You will generally still have the option to purchase additional types of cover from the same insurer, but each of those premiums would be separate and have its own premium, and policy number. Because each policy is held seperately, claiming on one policy generally won’t affect the benefits on your other policies.

Pros

  • The sum you are insured for, won’t decrease if you make a claim on a different type of cover.
  • You’ll typically have more freedom to review your cover as your circumstances change.

Cons

  • Premiums for multiple policies are typically more expensive.
  • Generally, you’ll have more to keep track of if you have multiple policies with potentially different renewal dates.

How do linked policies work?

Linked life cover works in a similar manner to personal insurance. You’ll pay one premium to receive multiple cover types with the same features and benefits as you would for a personal policy. However, if you make a claim for one type of cover, your sum insured for the other policy types will be reduced by the amount you claimed.

Case Study

Suppose you are a 35-year old non-smoking male living in NSW and you take out cover for $500,000 of Life Insurance as well as Total and Permanent Disability (TPD) Insurance to the value of $400,000 (Any occupation) you can generally expect to pay a premium of around $32.72 per month. If you are then injured and unable to work, have a full claim on TPD cover. Then, your Life insurance will be reduced from $1 million to $700,000 after your TPD claim has been paid.

Case StudyLife InsuranceTPD Insurance
Amount of Cover$500,000$400,000
Claim Paid($400,000)($400,000)
Cover during 12 months after the claim$100,000$0

Source: Life Insurance Direct Comparison Engine (August 2021)

Which types of cover can be combined?

Generally, you’ll be able to combine a life insurance policy with either Trauma cover, a TPD policy or both. The other option that you typically have is to link your critical illness insurance and your TPD policy.

  • Life and TPD insurance: Total and permanent disablement insurance can typically be linked to a life insurance policy. If you are unable to work ever again because you have been totally and permanently disabled, this cover type generally pays you a once-off lump sum benefit.
  • Trauma and Life insurance: By linking your life insurance policy with trauma cover, you’ll generally ensure you’re taken care of if you are diagnosed with one of the conditions as set out in your Policy Disclosure Statement (PDS). This type of cover generally pays out a benefit that can be used to cover your medical expenses.
  • Critical Illness and TPD Insurance: If you already have a life insurance policy, you may decide to keep that as a standalone policy. In that case you may be able to link a TPD and Trauma insurance policy.
  • Income protection: Generally, you won’t be able to combine income protection in the same way you would with certain types of lump sum cover, some insurers may offer you a mult-policy discount between 5-10% if your purchase a lump sum policy with your income protection.

How do I choose the right plan?

Whether you should bundle your life cover or not generally depends largely on your unique situation and requirements. However, there are some advantages to linking your policies. Generally, combined life cover makes more sense financially and there is the added convenience of only having a single policy to manage with one renewal date.

Super Linking

Generally, super linking allows you to purchase a combined policy that is owned in part by your super fund and partly in your name. This would allow you to have Life Insurance and Any Occupation TPD cover within a super fund and Trauma Insurance linked outside and held in your name for example.

Frequently asked questions and answers

  • What is a buyback option?

    A life cover buy back benefit is an extra benefit that you can purchase to help ensure your family’s financial security. This benefit typically offers you the opportunity to buy a portion of the reduced life insurance back 12 months after you’ve received a full trauma or TPD claim.
  • Who is a combined policy suitable for?

    Typically, a linked insurance policy is a good option if you’d like comprehensive cover that is more affordable. However, it’s a good idea to compare all of your options before deciding whether linked cover is right for you as each persons circumstances and requirements are different.
  • What policy options are available as part of a combined policy?

    Generally, a life insurance policy can be combined with either Trauma cover, a TPD policy or both. If you already hold a life insurance policy, you could consider linking your critical illness and TPD cover.
  • How do I know if I have linked or stand-alone insurance?

    To find out whether you have a personal or combined policy, it’s generally best to check the details outlined in your policy documents, or Product Disclosure Statement. Alternatively, you have the option to reach out to your insurer directly and ask them about the details of your policy.

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