What’s the difference between group and retail held insurance policies?

Hi everyone

Welcome to the June 2025  ‘Latest Happenings’ in Personal Insurance Claims. 

This month I be discussing the differences between group held insurance policies and retail personally held policies.

Group Personal Insurances

These are generally offered by superannuation funds and sometimes employers, through their superannuation plans. The cover is often a unitised cover and the cover amounts will go up or down depending on your age (eg. More cover when you’re young, and after a certain age, declining before disappearing altogether).

Generally, these policies are not medically underwritten, unless you increase from the default cover. However, it is important to read the PDS that comes with this insurance, as some insurers will state in this document that you will not be covered for pre-existing health conditions. I have even seen some PDS saying if you have certain medical trends in your family (like more than 2 relatives with cancer) that you will not be covered for that illness.

It is important to note, in group cover, that the terms outlined in the PDS can be altered after your cover commences (unlike retail policies, which can only be changed to your advantage).

It used to be the case that the group covers often worked out cheaper than a retail cover, but in the years since the LIF legislation, this is more and more unlikely to be the case. If your health is good enough to go through medical underwriting, then it can pay off to get a financial planner or general insurance broker to do some comparison quotes for you.

These group held insurance policies are funded by your employer’s contributions (or any additional contributions you make) to your super fund. The good thing about this is that having insurance held in super doesn’t affect your cashflow, however, the downside is that they can substantially erode your superannuation savings if you aren’t making any extra contributions to your fund.

Retail Insurance policies

You can get personal advice on your insurance requirements from financial planners, or work out how much cover you need using online calculators and get an insurance broker to run quotes for you to choose the company that offers the best deal for your age, occupation etc. The risk of not getting personalised advice is that you may not think of all the different variables that might alter the level of cover you would choose yourself. At the end of the day, it depends on how knowledgeable you are about financial issues. It’s worth shopping around and getting quotes as some financial planners may give you advice and help implement the insurance without charging, and others may  charge a fee for service. A financial planner can also help review your current super fund, look at whether your investments are appropriate for your circumstances, help with cash flow management, goal setting etc.

The benefits of retail insurance policies are many –

Your insurance coverage can be tailored to meet your specific needs, and you will have access to additional features that are not available in group held insurances. For example, an ‘own’ occupation TPD and IP cover, critical illness linked to your life/tpd covers, etc

You can bundle your life, TPD, critical illness and income protection policies together in a tax effective way. For example, you may wish to put your life, TPD and IP covers into your super fund with links to some ‘bells and whistles’ outside of super so that you get the best coverage with part of the cost coming from your cashflow and part coming out of your super fund. Obviously, it would be ideal if you could also do some contributions into the super fund so that there isn’t any impact on your future retirement savings.

Things to think about when considering group policies vs retail covers is:

Tax – Life and TPD held insurance policies get a 15% tax deduction (eg. it is paid out of pre-tax money from your super fund) but the proceeds of any payments will be made into your super fund and these may be taxable when withdrawn. 

Cost – shop around and see which type of policy works out best for you.

Features – what do you really need for your age and personal situation? When you’re young with no mortgage, children etc, you may not need a lot of life insurance cover, but you should know that TPD, Income Protection and critical illness can be important at any age. 

Insurance covers should be reviewed as your situation changes. Some significant life events that require a cover amount rethink are, buying a property, having a child, receiving an inheritance, getting a new job or promotion, etc. 

Come back next month when I will be discussing some of the tips and traps on getting your TPD insurance claims approved.