Combining Life Insurance Policies Could Save You Money
If you’ve recently taken out a mortgage, gotten married or started a family, you might be wondering whether a single policy combining life insurance, TPD and trauma cover might be better than purchasing them separately.
Find out which option might be best suited to your unique requirements by reviewing the pros and cons of combined policies and how claiming could affect your payout.
What does it mean to bundle life insurance?
When bundling personal insurance policies, for example, life insurance and TPD, you’re combining several types of cover into a single plan under one company, which is generally more affordable than purchasing stand-alone policies and may be more convenient to manage.
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Can I combine life insurance?
Yes, you can generally choose to combine your life insurance policy with either TPD or trauma cover or both. Alternatively, you can decide to keep your life cover as a stand-alone policy and bundle TPD and critical illness insurance together.
Can you combine life and TPD insurance?
Yes, total and permanent disablement insurance can generally be purchased as a rider on a life insurance policy and pays a once-off lump sum if you become totally and permanently disabled, due to a sickness or accident, and can never work again.
Combined life and critical illness insurance
By linking life insurance with trauma cover, you’ll typically receive a lump sum benefit whether you pass away or get diagnosed with one of the critical illnesses listed in the insurer’s product disclosure statement (PDS).
Can I combine life and income protection insurance?
No, you generally cannot link life insurance with income protection under one policy. However, you can purchase an income protection policy from the same insurer you bought your life cover from and potentially get a 5% to 10% discount for taking multiple policies from the same company.
Stand-alone vs Combined insurance in Australia
Before you decide on getting a combined life, TPD and trauma insurance policy, you might want to consider the implications of having bundled policies vs separate.
Stand-alone life cover
You can still purchase different policies from the same insurer, but have the sum insured amount set individually for each type of cover, so claiming on one will not affect the cover amount of the other policies.
Combined life insurance
Linked life insurance policies combine products and their cover amounts together, so you have one total cover amount. If you claim on any of the combined plans, your total benefit will be affected.
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Will you get a discount when combining personal insurance?
Yes, you can usually save money when bundling personal insurance products into one policy. The cost of purchasing trauma or TPD insurance is substantially more affordable when bundling them with a life insurance policy as opposed to buying them as stand-alone policies. However, just as premiums vary from insurer to insurer, so do the life cover discounts.
Select insurers may still offer you a discount when taking out multiple stand-alone policies from the same company; this is often called a multi-benefit discount.
Should you bundle your life insurance policies?
Whether you should bundle your personal insurance depends on your requirements and unique situation. Financially, combining life insurance makes a lot of sense and provides you with the convenience of managing only one policy with one renewal date and the potential for more money in your pocket.
However, when claiming on one insurance type, the total amount of your combined benefit will generally be reduced by the claim paid.
Pros and cons of combined insurance benefits
|Advantages of combining personal insurance||Disadvantages of linking life insurance|
|Savings: Combining insurance products like life, TPD and trauma cover, into one policy will generally be cheaper than buying separate policies.||If you have a combined policy and you make a claim, the total sum insured of all the products combined will be reduced by the amount paid out.|
|Convenience: Bundling multiple products into one policy can simplify policy management and reduce the amount of paperwork required.||Life changes: As your needs change your combined insurance policies may no longer be efficient, for example having kids or getting divorced.|
How does claiming affect your payout when life insurance is combined?
When combining riders (TPD and Trauma) together or with life insurance, you might only be able to claim for one event, depending on the insurer and the amount of coverage you purchased.
For example, if you have a combined life and TPD insurance amount of $500,000 and you make a TPD claim of $500,000, you cannot make an additional life insurance claim later on as the previous TPD claim would have used up all the funds.
In this instance, you may like to explore different policy benefits and features, like the life buy back options.
Double TPD or double trauma
Automatically reinstates the portion of full life insurance following a trauma or TPD claim in a combined policy. Select life insurance companies will offer you this benefit for an extra fee.
If you’re still unsure whether combined insurance or a stand-alone policy will best suit you, please give us a call on 1300 743 254, and a consultant will assist you.
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If you have a combined life policy, your total sum insured might reduce by a TPD or trauma claim. Find out how you can buy the reduced cover amount back!
You might be able to claim the whole life insurance lump sum benefit, when you’re diagnosed with a terminal illness and have less than 12 months to live.
Add low-cost life insurance benefits and features to your policy to potentially customise your life cover to better suit your specific circumstances.
You can have more than one life insurance policy in Australia. However, it depends on how reasonable it is for a person with your expected income and circumstances. Learn more about how multiple life insurance and income protection policies in Australia works and whether you can claim for all of them.
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