How Are Life Insurance Brokers Paid?

Commission is paid by the insurer to the adviser, not by you as a line item on your bill. The insurer prices its policies with that commission already factored in, so it is part of the standard premium rather than an extra charge layered on top. Under the Life Insurance Framework, commission is capped at up to 60% of the first year's premium upfront plus up to 20% ongoing each year (the hybrid model), or up to 30% level each year. If a policy lapses within the first two years, the insurer can claw that commission back from the adviser.

Some advisers work on commission only, and some also charge a fee for advice, particularly for more complex situations. There is no single answer across the industry. What matters is that any fee must be disclosed up front in the Financial Services Guide and confirmed in your advice documents before you proceed, so you are never charged something you did not agree to.

This is a fair concern, and it deserves an honest answer rather than a brush-off. The amount of cover should come from a needs analysis that looks at things like your debts, your income and the people who depend on you, not from what pays the adviser more. You are entitled to ask the adviser to explain the reasoning behind every recommended cover amount, and a good adviser will walk you through that rationale in plain terms. If the numbers are not clearly tied to a need you can see, that is your cue to question them.

Usually not for the same policy. Because commission is built into the insurer's standard rates rather than added on top, the price of an equivalent retail policy is generally the same whether an adviser is involved or not. Direct and "no advice" products do exist and can look cheaper at face value, but they are often different products with different terms, so it is rarely a like-for-like comparison.

Two things help here. First, commission is capped and broadly standardised across insurers under the Life Insurance Framework, so an adviser does not earn dramatically more by steering you to one insurer over another on price. Second, every adviser's remuneration is disclosed in the Financial Services Guide, and the reasoning for a specific recommendation is set out in your advice documents. You can read why a particular insurer was chosen, and you can ask questions until that reasoning makes sense to you.