About the Author

Brad is an experienced content writer with a keen interest in the finance industry.

Having helped regional businesses build processes and conduct digital marketing, it wasn’t until he begun the process of purchasing his first home that he developed a passion for educating consumers like himself.

Brad now works freelance, conducting research and putting together informative pieces for consumers and businesses

Who is an Insurance Broker? 

An insurance broker is a specialist who acts on behalf of the client. They have access to options from different insurers across the market. They asses risk and can negotiate premiums for their clients. Brokers are known for their abilities to get good deals as they have a thorough understanding of the market. Insurers assess risk differently which is why companies may have huge price differences for similar products. A good insurance broker will source a cost-effective deal without compromising the level of cover. In the event of a claim, brokers can also liaise with insurers on behalf on the client and they will generally assist their clients throughout the process. 

Insurance brokers are paid via fees for their services or commissions from the insurance company directly. Brokers have an obligation to inform clients on the fees they charge or any commissions they may receive from the transaction. 

 

Younger Australians are more likely to default on payments. (Source: Illion - Credit Card Nation Report, 2018)

Who is an Insurance Agent? 

An insurance agent works on behalf of an insurance company. This is either in the form of working for an Insurance Company directly, or working for another brand that markets insurance for one or multiple insurance companies. An agent does not have as much flexibility with personal advice as a broker, this is because insurance companies and their sales procedures are heavily regulated. A recent royal commission which caused reforms in the insurance industry saw a new prohibition making it an offence to offer a financial product for issue or sale, or request or invite the consumer to apply for such a financial product. Many companies have been forced to ‘scrap’ cross-selling sales processes to adhere to new industry guidelines. 

This means you’re less likely to have a salesperson trying to quote all of your risks when you only wanted a price on the car. It’s important to note however that prices and company risk assessment are always changing, so it’s a good idea to aim for a yearly health check to ensure you’re getting the best deal. 

What is a PDS? 

A PDS is a product disclosure statement. The Australian Government states that “it is a document that financial service providers must provide to you when they recommend or offer a financial product. It must include information about the product’s key features, fees, commissions, benefits, risks and the complaints handling procedure.” 

What about insurance in Superannuation? 

Super funds will typically offer life cover, income protection and total permanent disability (TPD) insurance. The benefits of having coverage within super is that premiums are generally cheaper as superannuation companies tend to buy policies in bulk. As well as being a cost-effective option, any salary sacrificing and employer superannuation contributions are taxed at 15%. The OECD reported the average marginal tax rate in Australia to be 24.1% in 2020, this can be an extremely tax effective method of buying insurance. 

SOURCE – Taxing Wages Australia, OECD Report, 2021

However, it is important to note that adding financial products into your super can decrease your balance. On top of this, these insurances can often expire. Life insurance through superannuation for example usually expires at 70 years of age, external policies will generally continue so long as premiums are paid. At the age of 70, life insurance is extremely difficult to obtain and most clients will have to settle for funeral insurance instead. 

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