Life insurance has long been seen as a set-and-forget product, but the Australian market is evolving quickly. With rising living costs and a growing appetite for financial transparency, more Australians are turning to unbundled life insurance policies to take control of their cover. In 2025, these products are standing out for their flexibility and clarity — but are they right for you?
What Is an Unbundled Life Insurance Policy?
Traditional life insurance policies often combine several components — such as death cover, trauma cover, and investment elements — into one opaque package. Unbundled life insurance, on the other hand, splits these components, allowing policyholders to mix and match the benefits they need. You only pay for what you want, and every fee and premium is clearly disclosed.
- Core cover only: Choose life cover, total and permanent disability (TPD), trauma, or income protection separately.
- Transparent pricing: Each element has its own premium, so you see exactly where your money goes.
- Flexible adjustments: Easily increase, decrease, or remove cover as your needs change.
This approach is increasingly popular with Australians seeking cost-effective protection that adapts to life’s shifting priorities.
Why Unbundled Policies Are Trending in 2025
Several trends and regulatory changes are fueling demand for unbundled life insurance in Australia:
- APRA’s Life Insurance Framework (LIF) Review: The Australian Prudential Regulation Authority has increased pressure on insurers to disclose fees and commissions more transparently, making unbundled products more attractive.
- Cost-of-living pressures: With inflation expected to remain above 3% in 2025, many Australians are seeking ways to trim non-essential expenses without losing core financial protection.
- Digital-first insurers: New players in the market, such as online-only insurers, are launching unbundled products that can be customised in minutes via app or website — often at a lower price point than legacy policies.
For example, Sarah, a 38-year-old Melbourne marketing manager, switched from a bundled policy to an unbundled one in early 2025. By removing unnecessary trauma and TPD cover (which she already had through super), she cut her annual premiums by 23% without sacrificing the security her family needs.
Key Advantages and Considerations
Unbundled life insurance offers clear benefits, but it’s not for everyone. Here’s what to weigh up:
- Pros:
- Pay only for what you need — no hidden extras.
- Greater transparency: see the cost of each benefit.
- Easy to adapt as life circumstances change (e.g., marriage, mortgage, children).
- Potentially lower fees and commissions due to streamlined products.
- Cons:
- May require more research and ongoing management to ensure you’re adequately covered.
- Some standalone covers could be more expensive than bundled options, especially for older applicants or those with pre-existing conditions.
- Risk of gaps in cover if you remove too many components.
As of 2025, ASIC’s guidance encourages insurers to provide comparison tools and personalised quotes, making it easier than ever to assess whether an unbundled policy is the best fit.
How to Switch to an Unbundled Policy
If you’re considering making the move, here’s a step-by-step approach:
- Review your current policy and identify any covers you don’t need or already have through super.
- Use digital insurance platforms to compare unbundled policies and get transparent quotes.
- Check the financial strength and claims history of any new insurer, especially digital-first providers.
- Consider timing — avoid gaps by overlapping new and old policies until the switch is complete.
- Update your beneficiaries and inform loved ones about the new arrangement.
With the right planning, unbundled life insurance could deliver more tailored cover at a better price, giving you peace of mind in uncertain times.
