Term life insurance and service fees

In October 2016, Helen met with an adviser who organised a life insurance policy for her. The adviser met with Helen at her home. During discussions, the adviser directed Helen to her terms of engagement.

The terms of engagement said that the adviser would not charge Helen a service fee if she remained with the insurance company that she brought the policy from, for 24 months.

In the event that Helen moved to a different insurer, the adviser would be entitled to charge a service fee. The fee was structured that for each month remaining in the first 24 months of the policy. Helen would be charged $100 per month by way of a service fee.  In this case Helen cancelled the insurance policy after 11 months and was charged $1,495 including GST.

When Helen failed to pay the service fee, the adviser sent the debt to a debt collection agency for non-payment. Helen complained to FSCL.


Helen alleged that the adviser never pointed out the fee structure. Helen also alleged that the adviser received the premiums for the policy and should not be permitted to claim a further fee.

The adviser stated Helen signed the terms of engagement, acknowledging that she had read the agreement in full. The terms were clear regarding payment of a service fee if Helen cancelled the policy in the first two years.


We reviewed the contract and the party’s version of events. We noted the terms of engagement set out the fee structure and gave the adviser the power to send any debt to a collection agency.

As the terms of engagement had been signed by Helen, she had agreed to all of the terms.  The adviser was entitled to assume Helen agreed to the terms whether or not attention was given to the specific clause.

Secondly, Helen had assumed that the adviser received the premiums rather than the insurer. This was a mistake of fact, and was corrected in the report. 

As the wording of the clause was specific and clear, the adviser was entitled to payment of the fee and to take steps to recover it.


We recommended that the complaint be discontinued. The provisions of the terms of engagement and the law were clear.

Insights for consumers

The detail is in the fine print. When you engage any form of adviser, you should read all the terms and conditions. You will be liable if you decide not to read the document yourself. As a matter of law, you are presumed to have read a contract if you sign the document. It is worth taking the time read the document in full, and ask questions if you do not understand something.  

For participants, make it a matter of best practice to point to your fee structure and disclose whether you are receiving a commission for your work.