However, recent years have seen a change in the direct life insurance market.
New players are entering the market and existing policies are being restructured to offer better value.
“We’re seeing a blurring of the lines between advised and direct product offerings both from a product design perspective as well as through new distribution channels,” Josh Callaghan, Canstar’s General Manager for Wealth says.
Direct life insurance vs advised vs super
There are three main ways of purchasing life insurance. The simplest is obtaining it through your Super Fund – a one-size-fits-all approach that may be cheap, but might not provide you with the cover you really need.
The second option is advised life insurance, where you engage the services of a financial adviser to help find the best policy to match your needs. Advised life can be a cost-effective way of getting the coverage you really need, but it can also be time consuming and can require invasive medical examinations.
The third and final method is direct life, which is the ‘DIY’ life insurance option. Direct life is fast and easy to apply for, covers you immediately and doesn’t require medical tests. Nevertheless, buying direct life insurance is very much a case of buyer beware. With no financial adviser to provide guidance, it’s up to you to study your options, look through the exclusions and find the policy that best suits your needs.
The above table displays direct life insurance products available for a male professional non-smoker aged 55-59.
Direct life catching up
Direct life has a reputation for being an expensive product, particularly when compared to advised life insurance. However, this has started to change in recent years, with some direct life products offering a better price than up to half of advised life policies.
“Consumers should not consider policies based on price alone, however, long term affordability of a life policy is an important factor in ensuring that the policy is still in place at the death of the policy holder and therefore, their next of kin can get the benefit of the cover,” Mr Callaghan says.
“What is most interesting about the changing landscape in life insurance though is how the features of both types of policies are starting to converge.”
Another common criticism of direct life products is that they lack many of the features common to advised life products and that they have too many exclusions. While it is still true that using an advisor helps in getting the specific mix of features you want, more and more direct life products are offering a full suite of features.
New feature rich products are entering the market, while older products are being temporarily withdrawn and then restructured to offer more coverage than before.
“We’re seeing direct life policies available on the market now that include NobleOak, Ozicare and Allianz which in the past has been the sort of extras that would only be expected from more fully featured advised products,” Mr Callaghan says.
“What’s more is that some of these benefits feature in the policies of the price leaders in the market.”
Direct life insurance is still a product for those with the financial nous to do a bit of investigative work and avoid the pitfalls. Fortunately, Canstar has already done some of the work for you. Our direct life insurance ratings allows you to compare price and features from 31 different policies and find the one that’s the best fit for you.