Why buy life insurance through a Financial Adviser instead of the ones offered during TV ads?
Picture this: you are sitting at home, watching your nightly program when the ad for life insurance comes on. Benefits such as refunding a percentage of your premiums, a $100 visa gift card, no medicals or tests and automatic acceptance over the phone.
Hmmm... sounds compelling doesn't it? But here is why it pays to see a financial adviser to get professional advice on insurance:
1. Firstly, how do you know how much cover you really need? Sure, you can pick a number that feels right - $100,000 or what about $1 million. But it is important to know that the purpose of having insurance is to insure that you and your family aren't facing financial ruin, not to create an estate (although that would be inevitable once a lump sum claim is paid out). Pay for what you need. Factors that can be considered when working out how much you need (but not limited to) is for the cost of medicals, education, debt, future income lost - the list goes on.
2. The TV ads have lower limits on how much you can cover. Say you work out the amount of cover you need. It is $2 million of life cover. You wouldn't be able to get cover for $2 million from the insurers advertising on TV., and when they say they can offer up to $1 million of cover - this generally applies to a younger age bracket.
3. You are in your 30's, married, have a young family and just bought your principal residence, the likelihood of you needing insurance for the long haul (30+ years) is high. So have you thought about locking in your premiums so they don't go up with each birthday? The TV insurances don't offer what is referred to as a "level" premiums which means they will advertise cheap insurance, but it will continue to increase each year. Don't you want the peace of mind knowing that your premium will go up with inflation only? Insurance is for the long term so you don't want to list it 5 years down the track just because you can't afford to keep it, that is probably when you will need it the most!
4. How should you pay for it? TV insurance don't offer you the option to pay for cover inside super. Super is a great way to fund insurance without affecting your cashflow. Sure, it is funded from your money anyway, but superannuation can claim the premiums as a deduction (you wouldn't be able to claim life/ TPD or trauma cover personally on your tax returns). Further, super is concessionally taxed, meaning it is taxed at 15% going into the fund, rather than your marginal tax rate. Double win!
5. Definitions - did you know that trauma (aka critical illness) cover is the most claimed insurance type? Just because you bought trauma cover, does it really mean you will get a pay out because you suffered stage 1 breast cancer? This is the difference with varying definitions of what is considered "trauma'. Highly rates insurers will pay out upon stricter terms (the cancer needs to be classified as terminal).
6. Lastly, but very important thing to note. You are paying the insurance so that in the event that you need to claim you are assured that the insurers will pay out. Statistically, insurance policies that have been personally underwritten at the time of application have a higher chance of a successful claim. Why? Because they have assessed your risks earlier on and have made the decision to insure you. (Underwriting is when they collect details such as medical history and hobbies to assess you risk and likelihood of claim). Getting medicals done shouldn't be considered a bad thing - it really is there to protect you. In saying that, insurances through advisers only require medical for higher limits of cover so depending on how much you are applying for, you may not be required to undertake medicals.
7. At the end of the day, you want to get cover that is right for you. It is a jungle out there, so getting a professional who lives and breathes this everyday is your best bet. It isn't just about the paying for the cheapest insurance, but a myriad of factors.
To speak to me about how I can help you decipher the insurance world and find cover that is right for you, please contact me on 0413 887 591 or email me: firstname.lastname@example.org
This article contains general advice only.
Liz Chevel is an Authorised Representative of Dover Financial Advisers Pty Ltd