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Pay For a Ferrari Receive a Hyundai – The Direct Life Insurance Mantra
June 4, 2015 .

Buying life insurance is a great idea. However, most people have formed the belief that buying insurance directly from the insurer is always cheaper as you are cutting out the middleman . While this may be true in most of the e-commerce world it is not the case with insurance. In fact, not only is going through an adviser going to be over 20% cheaper per year – you are also going to receive far superior cover than going through a direct/online channel.

The price

The price differential is staggering – the tables below highlight the difference between the average of the five cheapest direct life insurers and five cheapest indirect insurers for $500,000 of life cover and $5,000 per month (30 day waiting period, 2 year benefit period) of income protection (Non-smokers) at different ages:

Monthly Premiums - Direct vs Indirect (Males)

 Age 35Age 40Age 45Age 50Age 55
Life Insurance
Direct36456199182
Indirect29345190171
Difference23%32%19%10%7%
Income Protection
Direct546680106168
Indirect38445578118
Difference42%50%45%36%42%
Combined
Direct90113142207351
Indirect6879107169290
Difference34%42%32%22%21%
Annual Dollar Difference272400417447734

Across all age groups, getting life insurance through an adviser is, on average, 20% cheaper than going direct – for income protection the gap widens to closer 45%.  If a 40 year old was to take out both an income protection and life policy they would save over $400 per year by seeing an adviser – this is on top of the far superior cover they are likely to receive. The savings just increase as you get older and as the policy premiums get higher.

The table below performs the same analysis but for females:

Monthly Premiums - Direct vs Indirect (Females)

 Age 35Age 40Age 45Age 50Age 55
Life Insurance
Direct27354979139
Assisted23273967116
Difference17%29%25%17%20%
Income Protection
Direct7291110147226
Assisted516281115173
Difference39%46%36%27%30%
Combined
Direct100127160227366
Assisted7590121184290
Difference33%41%32%24%26%
Annual Dollar Difference294442467518906

Across all age groups it is 21% cheaper to go through an adviser for life insurance. Meanwhile, it is over 35% cheaper getting an income protection through an adviser. A 45 year old woman who wants both income protection and life insurance would save close to $500 per year by going through an adviser for her insurance needs.

The quality

It is not just the price of the policies that are more attractive – below are some other advantages and disadvantages of direct and indirect insurance:

Advantages & Disadvantages of insurance types

Advantages
IndirectDirect
Offer comprehensive understandings towards your needsCan buy online or via phone
Offer a more suitable tailored recommendationOnce your application is accepted, you are covered immediately.
More likely to be paid lump sum from your pre-existing medical condition.
Provide you access to useful tools and resources
Save your time (They do research for you)
Help you to avoid costly mistakes
Able to answer your questions in regards of insurance and relevant matters
Disadvantages
Not knowing a reliable financial adviserUnlikely to be paid from a pre-existing medical condition
Inadequate cover for your financial situation and lifestyle.
Limited cover options

The verdict

In our view there is no plausible reason for anyone to buy a direct insurance policy unless they enjoy paying more money for an inferior product. So if you currently have a direct policy then don’t delay – go see an adviser (right now!); they will be able to switch you into cheaper, better policy.

At Plenty we are  supplier agnostic – this means our roadmap compares life insurance quotes from 12 insurer to ensure we get you in the best policy possible – if you want to get a comprehensive financial roadmap that covers every aspect of your financial life, including insurance, get started here.

The information contained on this page is of a general nature and may not be appropriate for your personal circumstances. You should obtain personal financial advice before acting on this information.

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