Life Insurance and Double Dipping

paddyo on 25/07/2025 - 12:02
Last edited 25/07/2025 - 18:17 by 1 other user

It was last week when I first noticed an anomaly in my Life Insurance Policy.

Well, it's probably a standard term/condition but I never paid much attention to it before. To paraphrase, it stated that in the event of my death, and if I had a second policy, the current policy would only pay out the difference between the two policies if it is of higher value.

I have only bought one policy, for a sum of $550k in the event of my death, but my company Super policy also includes an insurance premium that pays out $320k in the event of my death. In my mind, great, a total sum of $870k will go to my wife in the event of my death. Apparently not.

Talking to my broker, MLC Insurance (MLC are also my Super fund manager), he intimated that as I am already covered for $320k by my Super, they would only pay out the difference ($230k) to make it up to $550k.

I then queried, if they know this, why am I paying for a premium worth $550k but will only get $230k? Why can't I just have a 'top up' style policy for $230k which might, I am assuming, be a lot cheaper?
Now, this is just my simplistic understanding of this, I am sure it is far more complicated and full of 'depends' but what am I missing here? Is this normal and accepted practice? Are there well-known alternative options that I am not aware of or considered? Am I just an idiot who should know better?
The broker did say that when I took out the policy that I was unaware of the double dipping and therefore they would not penalise me and pay out in full, but they do know now and I would not want to try and fudge the system or be fraudulent.

Does anyone know a very easy, legal, answer to this?

Financial Insurance Life Insurance

Comments

  • sghetti on 25/07/2025 - 12:16
    +8

    Pretty sure you could raise the life insurance policy in your super to $550k and be done with it? Why pay for multiple insurance policies? You're currently giving MLC 2 lots of premium. I don't know if a top up style policy exists, but the premiums would cover all sorts of other costs and not just the top up portion I would assume.

    • paddyo on 25/07/2025 - 12:25

      I have briefly looked at that, but the premiums were exorbitant. I do have a call booked with them to explore options and give me more advice (but they would do that wouldn't they :)).

  • DingoBilly on 25/07/2025 - 12:18
    +3

    Just pick the better insurance policy and the one that suits your need?

    You're over-complicating it otherwise. And the reason they don't cover you for both in full is pretty obvious in terms of fraud prevention…

  • skid on 25/07/2025 - 12:29
    +9

    That's borderline deceptive. Good thing you read the fine print. Not an idiot at all, probably the way around. Definitely cancel the policy that has the higher premium. Maybe I'm naive, but I do not think that policy is normal accepted practice.

    edit: This link says you can claim on multiple Life and TPD insurances, but only one income protection insurance.

    • S2 on 25/07/2025 - 15:20
      +1

      borderline

      If true, it is completely deceptive. When selling the life insurance (outside of super), they should at least disclose it rather than bury it within policy.
      Better yet, they should not be double dipping at all.

  • barge-in hunter on 25/07/2025 - 12:36
    +7

    This is exactly how a lot of insurance policies work - found out during a recent income protection claim.

    Worse still, both insurance companies wriggled out of full payments, pointing at the other policy.

    Had to complain to the regulator to get them to eventually play ball. At one point, one insurance company was claiming “we had to pay them back” for entitlements already paid.

    My recommendation - cancel one policy or the other, and make 100% certain that the one you keep meets all your needs

    • paddyo on 25/07/2025 - 12:38

      Yep, I just want to ensure that whatever I have is easy for my wife to claim in the event of my passing, last thing she would need is a burden of fighting insurance companies. Mind you, $830k might make it worthwhile :)

      • sghetti on 25/07/2025 - 12:49
        +1

        Yeah, having multiple policies is inevitably going to make the process messy. Better to have one point of call and not have anything pop up like that. Can't imagine the grief in that process, then getting caught up in insurance companies refusing to pay out or making the whole process difficult.

        • barge-in hunter on 25/07/2025 - 12:52

          This. It’s hugely stressful taking insurance companies to the regulator - on top of everything else, it’s just not worth it.

          If you want more coverage, then up one of the policies and cancel the other. It’s not guaranteed you’d get the full amount from both, just by keep paying for them

          • paddyo on 25/07/2025 - 12:56

            @barge-in hunter: The policy with my Super is, ostensibly, free so I will definitely keep that one. I need to find out more about topping it up but initial analysis seems a extremely high additional payment.

            • Shoocat on 25/07/2025 - 14:02
              +3

              @paddyo: It's far from free, but it is usually the cheapest way to buy life insurance.

  • joka on 25/07/2025 - 14:43
    -1

    I am no expert but that would be fraud and since they cant really do much to you, they will probably just deny your claims for your loved ones.

    My understanding is insurance comes out of a big pool of money, no matter the provider. This is why when there is a natural disaster in another state, we all pay bigger premiums.

    And this is why when some ozbargainer makes 10 claims, we all get higher premiums.

    • tenpercent on 25/07/2025 - 17:33
      +1

      This is why when there is a natural disaster in another state, we all pay bigger premiums.

      They didn't factor the risk properly then.

  • JIMB0 on 25/07/2025 - 15:29
    +2

    This is how insurance works. You can have multiple policies on your house, but if it burns down they're not going to pay you multiples of it's value, they'll collectively pay upto the value of it.

  • Cyphar on 25/07/2025 - 15:48
    +4

    My wife works at MLC Life and I asked her this. This is the response she gave me

    "Probably means he has been underwritten for amount he is paying for on the condition he cancels the original cover - when you apply for insurance they ask if you already have insurance and if this is intended to replace that cover. Likely this person would have said this and the amounts would have been underwritten for that amount. A clause is then added to the policy when it is issued that per the disclosure provided you said you would cancel your exisiting cover and that’s on you to do so..

    Reason being the amount of life cover taken out is usually assessed against your needs ie you have dependants/mortgage etc they don’t typically let you take out random large amounts without reason - although this amount is small enough they probably wouldn’t have cared.

    This is all assumptions without knowing all the details. Other possibility is that it is part of his income protection for which you cannot double dip"

    Hope this helps.

    • tenpercent on 25/07/2025 - 17:31

      "Excellent transcription, darling."

      • Cyphar on 25/07/2025 - 18:22
        +1

        Lol. I copy-pasted the message she sent me :p

  • bobbified on 25/07/2025 - 16:56
    +2

    For Death and Total Permanent Disablement insurance (TPD), you can generally have more than one policy and they'll all pay out if one of those events occur. The general exception is where they're all under the same insurer - then there might be a limit on the total amount paid out by that single insurer.

    I, myself, maintain six death insurance policies.

    It is the Total and Temporary Disablement (TTD), aka Income Protection/Salary Continuance, that is limited to a total of ~approx 85% of salary (75% salary+super) across all policies. So if you have more than one policy, you cannot get them all paid out if it totals over that 85%.

  • Merish4U on 25/07/2025 - 17:12

    Yes, is very dodgy but as others said very common for life insurance - I can recall seeing this on policies from 20yrs ago (which was the last time I had such cover). Govt oversight really should have ensured this was much more visible instead of being hidden away in the insurer's 100+ page terms and conditions.

    Ensure you're factoring in 15% taxed vs post tax dollars at your marginal rate when it comes to comparing premiums - as that will reflect the true cost to you.

  • mrtin on 25/07/2025 - 17:53

    Maybe obtain life insurance advice from a licenced financial adviser.
    I would say, typically,multiple death policies can pay out.
    Please advise of the specific product thst you're saying doesn't allow for multiple lump sum payouts.
    As someone mentioned, it could be thst it was a condition of application thst other policies are disclosed,and in your case, they had to be cancelled. This is specific to you, not the policy in general.
    Income protection is a different beast.

  • ozbargainoid on 26/07/2025 - 07:54

    I would be moving to an Industry Super Fund as they generally have better results.
    Look for one that has the best life insurance benefit and/or allows you to do extra premiums, and ditch all your MLC stuff.

    • eyesky on 26/07/2025 - 09:00

      Without knowing all information this is not good advice. This person may have an underwritten policy with health conditions that would exclude them from group insurance with an industry fund.
      It’s true that group cover can be cheaper, but results are not necessarily better - depending on circumstances.

    • mrtin on 26/07/2025 - 10:36

      I would caution against general comments like this.
      Op needs to compare properly by looking at pds otherwise pay someone for advice.

  • eyesky on 26/07/2025 - 08:52
    +2

    The correct answer is that the policy held in super is owned by the fund with proceeds paid to the fund not you. The super fund trustee will then decide where proceeds of your account are paid based on the rules (binding death nomination etc). Yes you are the insured life, but not the owner technically. Super funds are a separate entity controlled by a trustee. This is the same for SMSF or Group funds.
    The policy you have taken will MLC I presume is in your name owned by you.
    Policies have seperate owners and therefore not contingent on one another.

    • paddyo on 26/07/2025 - 09:46

      That actually makes sense. Thanks.

  • Drj55 on 26/07/2025 - 10:07
    -1

    You shoukd be entitled to refund of all the premiums you paid for one of them as essentially they were selling you a policy that could not be used.

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