O.K. ladies, I’m crossing over to the “dark side” today.
We’re going to talk about a topic that is not particularly well liked amongst the general public.
A topic that only ever comes up at BBQs when a friend has had a bad experience.
A topic that can be complex and confusing.
I’m talking about….life insurance.
Now STAY WITH ME LADIES!
Before you close down this post, put your fingers in your ears and start yelling “la, la, la, la, la” let me tell you something that could be the difference between a lot of money spent and nothing gained, and a real claim being paid to help you and your family at a time when you really, truly, need it.
And just to make things a little more interesting, let’s compare shopping for life insurance to shopping for dresses!
Tash, all insurance is the same!
I’d forgive you for thinking that, most people do. But in fact there are different types of life insurance and depending on which one you go with, and where you buy it from, you may end up having a vastly different outcome – just like with shopping for a dress, right?
You know the daytime telly ads you see about life insurance?
Those are known as “direct” products. Think of it as buying a dress from an online store. It might seem cheaper, but it also might not look like the picture when it arrives, it might not fit you and you probably won’t be able to return it, so it will cost you more in the long run.
And the policies you can only access through a financial adviser?
Those are known as “retail” policies. Think of these as buying that same dress, but from a well known boutique instead; where there is an assistant to help you, you can try it on and make sure it fits, and they have a great returns policy.
Get to the point Tash, what’s the difference?
THE FACTS ON DIRECT
Well, unlike buying that dress cheaper online, you’ll probably be surprised to hear that taking out a direct life insurance policy generally results in a lower quality insurance policy at a higher premium.
Because the overhead costs (TV advertising, call centers, etc) are high.
So your policy is left with fewer options for cover and a greater number of exclusions to the policy – which, unless you make sure to read the fine print, you may not even be aware of until it is too late! All while still paying a higher premium.
What’s more, many direct insurance policies are not underwritten until you lodge a claim, which means that you won’t know whether the policy will actually cover you until you lodge your claim (and the claims process can take a while – sometimes months if not years!).
The Facts on RETAIL
A retail life insurance policy on the other hand (which costs the insurance company a lot less to promote) has a wider range of options for cover and is generally much less expensive. It is also medically underwritten at the time of application, not at the time of claim, which means you’ll know from the start what you are and aren’t covered for.
The difference in time of medical underwriting also means that retail policies tend to pay most claims, while the direct policies decline around half the claims received.
As you can see, I would always recommend seeing a financial adviser and accessing “retail” life insurance policy options. And best of all, many financial advisers do not charge a fee for insurance advice as they receive a commission from the insurance company (much like a mortgage broker with a home loan), so it won’t cost you any extra to get the “retail” policy, plus you’ll have access to professional support and advice throughout the process.
*Just for the record I’d also recommend buying your clothes at reputable stores only!
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