Like many products, you have the option of bundling multiple life insurance products under a single bill. You may think this ensures you only have to deal with one bill, and your level of cover is unaffected.
But it doesn’t work that way.
The difference between linked and stand-alone cover
- Linked: Claim on this and the total amount you’re insured for may be reduced.
- Stand-alone: Claim on this and only one of your insurance products is affected
Confused? We give you a little more background and offer some examples below.
Linked life insurance policies combine multiple life insurance products together, and you’re sum-insured for a total amount. Linking your policies will typically result in a cheaper premium.
Let’s say you’re covered for…
- $250,000 in term life insurance,
- $100,000 in TPD, and
- $25,000 in trauma cover.
Although the above represents a combined total of $375,000 worth of cover, the maximum sum insured is only $250,000. You can’t claim for more than that amount.
For example, if you had to make a claim for trauma and a payout of $25,000 was made, then the total sum insured would reduce to $225,000. And, like wise, if you made a claim for TPD and $100,000 was paid out, then the new sum insured would be $125,000.
A stand-alone life insurance policy still bundles your insurances together, but the sum-insured amount is instead set for each product. For example, you could have the same level of cover as detailed in the previous section, but claiming on TPD won’t affect your term life or trauma cover. That also means you won’t be able to claim more than a certain amount for each type of cover (e.g. the maximum you can get from trauma cover is $25,000).
What’s a ‘buyback option’?
For anyone with a linked policy, buyback options give you the opportunity to bolster your sum-insured following a claim.
For example, say you had to claim on your trauma cover, and this reduced your total sum insured amount. Exercise a buyback option, and you can pay a little more money to restore your total sum-insured. This ensures you keep that cover fit for purpose in the event you need to make a big claim in the future.
How will I know if I have linked or stand-alone insurance?
You’ll know whether you’re insured under a linked or stand-alone policy because it’s listed on your insurance certificate. Don’t worry, you can always call up your insurer to check.
What should I do next?
The information provided here is general only and does not consider your personal objectives, financial situation or needs. Before you decide to purchase a product, it is important to read the relevant PDS.