Wednesday, April 8, 2015

Critical and Important Differences of the Direct Purchase Insurance (DPI)

Ever since the announcement by MAS on the 2 new initiatives for insurance products, it has generated quite a bit of activity on social media. I even see my own friends sharing news articles related to the changes. I wrote about the 2 new changes in an earlier post here.

One of the changes was that consumers can now buy insurance directly from customer service counters or websites of insurance companies directly without having to go through a financial advisor. The premiums will be cheaper as no commission will be imposed. Some of us may be all ready to abandon our financial advisers and buy those cheaper premium insurance. But, after looking deeper at the Direct Purchase Insurance (DPI) scheme, there seems to be some critical and important differences of the Direct Purchase Insurance (DPI) as compared to non-DPI.

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DIYInsurance has kindly updated and provided me with good information on this DPI scheme. I will touch on some of the limitations in this post.

Critical and important differences of the Direct Purchase Insurance (DPI)

There are differences between DPI and Non-DPI products. I will touch on 2 of the insurance components mainly Total Permanent Disability (TPD) and Critical Illness.

1. Total Permanent Disability (TPD) Definitions

When making claims for TPD, here are the differences between DPI and non DPI products:

DPI Products
Total and irrecoverable lost of use of any 2 of 6 limbs namely, the eyes, legs above ankles and hands above wrist.

Non – DPI Products
Total and irrecoverable lost of use of any 2 of 6 limbs namely, the eyes, legs above ankles and hands above wrist;


Inability to perform any 2 or 3 Activities of Daily Living, namely, Transferring, mobility, toileting, dressing, washing, feeding.

*This means non-DPI products are more flexible when claiming for total permanent disability (TPD).

2. No. of Critical illness definitions

The number of critical illness definitions varies for DPI and Non-DPI products:

DPI Products
30 critical illness covered

Non – DPI Products
30 to 37 or more critical illness covered

*This means non-DPI products have a wider range of critical illness which we can claim for.

Limitation of $400,000 coverage for each insurance purchased through DPI

If you purchase your insurance through the DPI scheme, the limitation for each insurance policy coverage is $400,000. It is important to note that for any life insurance coverage of above $400,000, it is more cost-efficient and affordable not to purchase through the Direct Purchase Insurance (DPI) channel. This is because most DPI products are not as affordable as compared to other offerings out there even though there are no commissions involved with DPI offered by the insurance companies.
Let me show you an example to illustrate what I mean by more cost effective not to purchase through DPI if coverage is above $400,000.

Assuming an example of the following profile:

  • A 30 year-old Male
  • Requires $500,000 of life insurance coverage (with no critical illness benefit) up to 65 years old

The most cost-efficient way of providing for this coverage is to purchase:

No.ProductInsurance Coverage ($)Cost (Annual premiums) ($)Total Commission Rebates ($)Annual Premiums ($)
1AXA Life Term Protector500,000633 (Quoted by DIYInsurance)55 (From DIYInsurance)633

Making your full-purchase on your own from Direct Purchase Insurance products will incur the following cost:

No.ProductInsurance Coverage ($)Cost (Annual premiums) ($)Total Commission Rebates ($)Annual Premiums ($)
1DIRECT–AXA Term Lite400,000490 (Quoted on comparefirst)0490
2DIRECT-Z Basic100,000187 (Quoted on comparefirst)0187

This shows that for any coverage which is above $400,000, buying through DIYInsurance will be the most cost-efficient method. There is a cost savings of $44 in annual premiums together with $55 of total commission rebates. ($633 in annual premiums for the first calculation versus $677 of buying through the Direct Purchase Insurance channel).

Furthermore, this provides you with great convenience. Instead of going to 2 or more insurers to purchase insurance products, you are able to fulfill your insurance needs just by going to DIYInsurance

I hope the above information and example gives you a better understanding of the new DPI scheme and when to or not to purchase through DPI in order to get the best cost benefit. Next time when you hear about DPI, I am sure you’ll be more aware of what’s happening out there just like how I have learnt through research and writing this post. I would be smarter not to overpay for my insurance purchases in the future. 

If you want to learn more about insurance, you can also consider attending the following complimentary event organised by DIYInsurance (Click on link below to sign up)

The following topics will be covered:
  • Understanding Direct Purchase Insurance (DPI) and their differences
  • Understanding how life insurance web aggregators work
  • Using life insurance web aggregators to compare and save money
  • Understanding yours' and your family's insurance needs
  • Crafting your own insurance plan
  • Understanding what commission rebates are
*This is a sponsored post by Providend Ltd

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