When people start exploring life insurance, it’s easy to feel lost. There are products advertised by general insurers, some offered directly online, others through advisers – and many look similar on the surface but work very differently once you look closer.
The market is a mix of cover types and approaches. Some products offered by general insurers are actually life insurance policies that have been white-labelled or branded under another name. Others are simplified versions of traditional life insurance – with fewer questions, lower maximum cover, and sometimes fewer features or definitions.
It’s also common to find accident-only or accident-and-sickness policies that appear similar but are technically general insurance contracts, renewed each year like car or home insurance.
These differences aren’t always easy to spot, and simpler isn’t always better. Fewer questions may make it easier to get started, but they often come with stricter limits or tougher checks later.
This article explains the main differences – how general and life insurance each work, how “direct” options fit in, and what to look for before you decide. It can’t capture every variation, but it will help you recognise what matters most.
Understanding the complexity
This article simplifies a complex area. Life insurance products vary widely in structure, underwriting and pricing. The goal is to explain key differences so you can ask the right questions before buying – not to capture every variation.
What general insurance usually covers
General insurance protects things you own or day-to-day risks like your car, home, business property or travel. Policies are typically 12-month contracts. At each renewal the insurer can change price or terms, and may decline renewal.
Personal accident-and-sickness policies offered by general insurers follow this yearly model. They can provide short-term income replacement for accident or illness but are not guaranteed renewable, and terms can change at renewal.
What life insurance usually covers
Life insurance protects people, not possessions. Policies typically include Life cover, Total and Permanent Disability (TPD), Trauma, and Income Protection.
Once accepted, life insurance is generally guaranteed renewable – meaning you can keep your cover for life (subject to maximum ages) as long as premiums are paid, and your personal medical terms remain locked in even if your health changes.
Underwriting – when and why it matters
- Fully underwritten life cover asks detailed health questions upfront, sometimes with medicals, providing greater claim certainty.
- Simplified or short-form underwriting uses only a few questions. It’s faster but may limit benefit amounts or apply broader exclusions.
- Guaranteed-acceptance products require no health questions but often exclude pre-existing conditions or assess your health later if you claim.
Simpler entry can be convenient but may reduce certainty. More assessment upfront usually means fewer surprises when you or your family need to claim.
The “standard rates only” limitation
Simplified or guaranteed-acceptance products are normally available only at standard premium rates. If your health, job or lifestyle falls outside those criteria, the application may be declined rather than adjusted with a loading or exclusion.
Example: Someone with well-managed Type 2 diabetes might qualify for life cover with a higher premium under a fully underwritten policy but be declined for a simplified product. These outcomes vary between insurers but highlight the trade-off between convenience and flexibility.
Direct life insurance – how it fits in
Many direct life insurance policies available online or by phone are genuine life insurance, but they vary in how detailed the health assessment is.
Some offer only Life cover, while others add Trauma or Income Protection. TPD is less common in simplified versions. Cover amounts are often capped at around one to two million dollars, while fully underwritten options – whether purchased through an adviser or directly – may allow far higher sums. These caps exist because simplified applications involve less medical evidence.
Simplified cover can suit people who need smaller amounts quickly – for example, while arranging a loan or bridging a gap in existing cover – but it’s important to understand its limits and check the detail before applying.
A spectrum of direct and general insurance cover types
| Fully Underwritten (Advised or Direct) | Simplified Underwriting (Direct) | Accident & Sickness (General Insurance) |
|---|---|---|
| Detailed health and lifestyle checks | Few health questions | Minimal questions |
| Tailored loadings or exclusions possible | Standard rates only | Standard rules only |
| Higher cover limits (often $5M–$25M+) | Moderate limits ($0.5M–$2M typical) | Lower limits |
| Full illness & accident cover | Usually illness & accident | Often accident-only |
| Guaranteed renewable | Guaranteed renewable | Annual renewal |
Why “guaranteed renewable” matters
Guaranteed renewable cover is one of the key advantages of life insurance. It locks in your personal terms when accepted – the insurer can’t change definitions or remove your cover because of changes to your health, occupation or claim history.
General insurance products like accident-and-sickness policies are renewed annually, so terms and premiums can change or renewal may be declined. For long-term stability, guaranteed renewable life cover usually offers greater certainty.
Easy-to-miss examples that change outcomes
- Accidental death-only cover is often a small add-on product. It’s not typical of most life insurance but can be mistaken for full cover because of the word “life” in its name.
- Funeral insurance usually provides a limited amount of cover and may include a waiting period before full benefits apply – if death occurs within that period, only part of the benefit or a refund of premiums may be paid.
- Credit card or mortgage insurance often has narrow definitions or exclusions for pre-existing conditions.
What to check before you decide
Use this list when comparing any two products:
- Is it life insurance or general insurance accident-and-sickness?
- Does it cover illness as well as accident?
- Is the policy guaranteed renewable or annual renewal?
- What are the definitions, exclusions, waiting period and benefit period?
- Are there occupation or age limits?
- Can the insurer apply loadings or exclusions for your situation?
- What is the maximum sum insured?
- Can you increase cover later without re-applying?
- How might premiums change over time?
When to speak with an adviser
A licensed life insurance adviser can help interpret the fine print, explain definitions, and guide you through underwriting so you know where you stand before applying. They can also compare fully underwritten and simplified options, balancing cost, convenience and certainty.
An adviser’s role is to help you secure the right protection for your circumstances – not just a quick policy, but one that works when life takes an unexpected turn.
Disclaimer
This information is of a general nature only and does not take into account your personal objectives, financial situation or needs. It is designed to explain broad differences between general insurance and life insurance but does not account for every product variation or feature available in the market.
Policy terms, cover limits and underwriting approaches differ between insurers and may change without notice.
Before acting on any information, always read the Product Disclosure Statement (PDS) for the product you are considering, confirm who the actual insurer is, and seek qualified advice or make your own enquiries to ensure the cover suits your circumstances.
