Tamara Vawdrey
Associate Financial Planner
Mulcahy & Co Financial Planning, Ballarat.
Direct insurance vs Retail insurance: What does it mean for you?
28 April 2021
As a financial planner, a situation we commonly come across is seeing clients who have purchased Life insurance or Income Protection insurance over the phone from an insurer who has advertised on TV.
It is always an interesting conversation to have to find out why they chose to go down that avenue rather than getting advice from a Financial Planner and generally the answer is the same, time and cost.
The questions that I ask my clients are the following:
- Did you read the fine print to understand if there are any exclusions?
- Why did you choose that level of cover?
- Did you consider any other types of insurance cover ie: Life, Total & Permanent Disability Critical Illness or Income Protection cover?
- Did you consider cover for your partner/significant other? Who will look after your children if something was to happen to them?
Income Protection is the insurance that clients make the biggest mistakes when purchasing through direct insurance because they don’t understand what the features and benefits mean. They might finish their 30 minute phone call and be set up on an income protection policy that is paid out for 2 years with a 90 day waiting period without understanding that this means if they are off work with an injury or illness they need to be able to self-fund for 120 days before they receive their first payment from the insurer.
Where clients really lose out with direct insurance is by not reading the fine print. When initially applying for direct insurance off the TV, the insurer will go through far less questions than if the client was applying for retail insurance through their Financial Planner and this is where the problem begins. You can ask any client that has been through underwriting with a retail insurer and they will tell you that they poked and prodded in all aspects of their medical history compared to a direct insurer who will only ask you around 10 questions.
Retail insurers are upfront and will tell you about any exclusions upfront whereas direct insurers have a “pre-existing health conditions” warning in their fine print that advises any medical condition that existed 5 years before you took the policy out will be automatically excluded.
While it is great to have some form of insurance, it is important to be covered in all instances for example you may take Income Protection but have you considered Critical Illness cover? A Financial Planner will be able review your entire circumstance and make sure you have the correct insurance with the correct amount of cover.
To protect your and your family’s future and ensure the correct amount of coverage in any situation, please book in a time to speak to us. One of most satisfying feelings as a Financial Planner is knowing you’re able to remove some of the burden from your client’s shoulders by processing claims for them and they can focus on their recovery.
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