Advised vs. Direct Income Protection

What’s the difference between Advised and Direct income protection insurance? Do they have different benefits or benefit periods? Which is cheaper?

Many people like to do their research and make their own decision about financial products, as with those who choose Direct Income Protection insurance. Others prefer to get advice from an expert in the field, as with Advised Income Protection insurance. No matter which approach you take, one thing is key: make sure you know what you’re signing up for.

So, how are Advised and Direct income protection insurance policies different?

Price

Premium prices have usually been cheaper for Advised Income Protection policies for White Collar occupations, and this year our data analysis team found that the Direct prices were cheaper on average for some Blue Collar occupations. In this table, we’ve highlighted the cheaper option for certain occupations and age group.

27-year-old non-smoker’s average monthly premium cost – Direct vs. Advised

Average monthly cost ($)
for $3,125 monthly cover
for 27-yo Male
Average monthly cost ($)
for $3,125 monthly cover
for 27-yo Female
Occupation Direct Advised Direct Advised
Accountant 42.51 29.79 52.27 41.98
Clerk 44.42 36.84 54.89 52.63
Registered Nurse 57.39 64.27 71.23 91.70
Electrician 63.07 65.06 78.38 92.83

52-year-old non-smoker’s average monthly premium cost – Direct vs. Advised

Average monthly cost ($)
for $3,125 monthly cover
for 52-yo Male
Average monthly cost ($)
for $3,125 monthly cover
for 52-yo Female
Occupation Direct Advised Direct Advised
Accountant 105.10 79.77 151.57 120.51
Clerk 112.14 101.52 162.06 154.33
Registered Nurse 152.34 187.51 215.05 279.39
Electrician 169.34 190.14 237.93 283.33

Source: Canstar. Based on products assessed by Canstar for Direct and Advised Income protection Star Ratings

Why would Advised usually be cheaper? Surely if you have to visit a financial adviser to buy an insurance policy, it would cost more? Not so.

Buying “over the counter” means that you are not buying a product from a financial planner who has considered your individual situation and found the best product for your needs and budget. When filling in a direct application, there are fewer questions to complete than with an adviser, so the insurance provider will leave some risk factor fields as “unknown”, often driving the price of your policy up.

If you’ve decided to go direct and not see a planner first, you need to do your homework and check exactly what you are signing up for. In particular, look carefully at pre-existing conditions that may be excluded from the policy, and how your level of cover will reduce as you grow older.

Customers may also find when applying direct that insurance providers sometimes will reject an application for someone with a risky occupation or lifestyle choices. Meanwhile, taking the Advised route may mean you can still find cover even with these factors taken into account.

 

Compare Direct Income Protection Insurance with CANSTAR

Typical benefit period

The Direct Income Protection products we rated this year typically had benefit period options ranging from 6 months to 2 years. One third of the 14 products we rated give the option of a 5-year benefit period and one (NobleOak, one of our two award winners) offers a benefit period of cover up to age 65.

Advised Income Protection products are likely to have more benefit period options on offer, including some even longer than to age 65, such as to age 70.

Maximum sum insured / monthly benefit

More than half of the products included in our Direct Income Protection rating (64%) offer a maximum sum insured amount of $10,000/month, with nearly a quarter capping cover at $7,500/month. Only two providers featured higher cover, with Zurich offering up to $12,000/month and NobleOak offering up to $25,000/month.

All Advised products have a maximum sum insured of at least $30,000 per month.

Partial disability

A partial disability benefit covers you if you return to work but at a reduced capacity (e.g. part-time). It gives you a reduced monthly benefit until either your benefit period ends or you return to work completely (whichever happens first).

Only 1 of the 14 Direct products we rated has a partial disability benefit as a standard inclusion. All advised products have a partial disability benefit option.

Specified injury and illness

A specified injury benefit is a monthly benefit paid for a certain number of months if you have an injury listed in your policy.

A third of the Direct IP products (5 out of 14) we rate offer specified injury benefits as a standard policy inclusion, while the remainder do not even offer it as an additional extra. The number of specified injuries covered ranges from 8 to 21 injuries. The number of months the benefit will be paid for ranges from just 1 month up to 24 months (2 years).

For Advised products, 35 out of 46 products from 13 providers have a specified injury benefit. That’s 76% of Advised products.

Similarly, a specified illness benefit is a monthly benefit paid for a certain number of months if you contract a specific illness listed in your policy.

Of the 14 direct products we rate, 4 offer a specified illness benefit as a standard policy inclusion, covering 3 to 30 illnesses depending on the provider. The number of months the benefit will be paid for ranges from 3 to 6 months.

For Advised products, 25 out of 46 products from 13 providers have a specified illness benefit, which amounts to 54% of Advised products.

Compare Direct Income Protection insurance policies

If you are looking for Direct Income Protection cover, you want to choose the insurance that provides outstanding value. In 2016, CANSTAR compared 14 Direct Income Protection insurance policies from 12 providers. Compare features and price for Direct Income Protection in Australia on the CANSTAR website.

 

Compare Direct Income Protection Insurance with CANSTAR

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