You’ve probably seen me post before about the risks of buying insurance online. But I wanted to delve a bit deeper into this issue because it seems many people have misconceptions about getting life insurance advice.
Here are some of the myths I come across regularly about online insurance and financial advice…
“Online insurance is cheaper!”
False. An insurance policy that you buy direct from the insurer (either online or over the phone) is not necessarily going to be cheaper than buying a similar policy with the help of an adviser. In fact, in many cases it can be more expensive. Up to 30% more expensive depending on your individual situation!
The cost of a life insurance policy is based on lots of calculations, including your occupation, your lifestyle, your age, the amount of cover you want and a host of other factors. This makes it quite difficult to compare policies just based on price, and that’s before you even start looking at the different features available on the market.
It’s the job of a financial adviser to know what policies are out in the market and which ones offer the best value for particular types of consumers. Advisers also know what additional features and benefits are worth paying for and which are a waste of money.
Why you need advice: Not only do you save time by having someone else do the research for you, you also save money by getting a policy that’s tailored to your individual needs.
“I just need a simple policy…”
False. What you need is a policy that is going to pay out when you need it. It can be easy to get lured in by the idea that a simple life insurance policy with no ‘bells and whistles’ is going to solve all your problems. But the reality is all insurance policies come with fine print. If you don’t have the time to read the fine print, you need to find someone who does, otherwise you could be paying for something that you cannot use.
Take Funeral Insurance for example. It seems like a simple product that pays a benefit to your loved ones when you die so they don’t have to pay for your funeral. But if you take the time to read the fine print, a lot of these policies pay a fixed benefit, meaning you could pay much more in premiums over time than the total that will ever be paid out. And if you decide to cancel the policy, you’ll get nothing back. Not such a simple proposition after all.
Why you need advice: A financial adviser takes all the complexity out of buying insurance, so you get the benefit of the most comprehensive cover without having to read all those product documents yourself.
“It’s quicker to get covered online.”
Getting covered online may appear quicker, but the question is – what are you really covered for? The reason it can take a little longer for you to get cover with a financial adviser involved is because a) they take the time to really understand what kind of policy you need, and b) they make sure all the underwriting is done upfront.
Underwriting is a process insurers use to assess your risk. If you have had health problems in the past, an adviser can work with the insurer to try to get you a slightly amended version of the policy based on your increased risk of claim. If you buy direct, however, the insurer doesn’t ask any questions about your health upfront. Instead, they issue you a policy and wait until you make a claim to ask the questions. That’s not the time you want to be finding out what you’re actually covered for! Pre-existing medical conditions, certain types of illness or injury and even your ability to perform any job after your claim are all factors that can result in your claim being denied by a direct insurer.
Why you need advice: It might be quicker to get a policy direct, but it probably won’t be quicker when you actually need to make a claim. That is, if the claim gets paid at all.
I hope I’ve helped to illustrate that there really is value in paying a small fee to an adviser to get life insurance advice. But if you’re still not convinced, give me a call and we can have a chat – obligation free.