Direct Insurance vs Retail Insurance: Pitfalls and Warnings
At Verdure Financial Planning Solutions we take insurance for you and your family very seriously! That is why we only recommend quality insurance products tailored to your individual needs that will pay in case of claim. Many of our clients asked us what the difference is between a retail insurance solution sources by a financial adviser and direct insurance.
The reason we do not recommend direct insurance is simple: it is expensive and may not pay at claim!
Direct insurance companies often offer insurance without the need for medicals, meaning that they are not underwritten at the time of application. Instead, the policy will be underwritten at the time of claim. For example, if you have a serious hip injury and take out a direct insurance policy you will be paying for the policy without knowing whether any of your hip-related issues are covered. Should you ever make a claim, they may deny your claim meaning that you paid premiums without ever being able to receive a benefit. All insurances recommended by Verdure Financial Planning Solutions are underwritten at the time of application and applicants are advised of any exclusions or loadings before the commencement of a policy.
Secondly, as a recent article by John Collett ‘Online Insurance Doesn’t Come Cheap’ (3 September 2014) in Melbourne’s The Age newspaper has shown, direct insurance is more expensive than insurance sought through an adviser. Insurances for a 45 year old female were quoted as $479 by an adviser and would have been $793 by direct insurance. Similarly, insurance for a 35 year old male would have been $351 through an adviser, but $537 with direct insurance.
Furthermore, we found that direct insurance often only offers Life insurance to age 64, and Total and Permanent Disability insurance to age 59. Premium options are only stepped, which increase every year as one grows older with no option for level premiums, which remain unaffected by age. So called Trauma insurances only offer protection for certain conditions such as heart attacks or some cancers and no comprehensive trauma solution for other conditions is available. Most troubling of all, is that direct insurance solutions by definition do not give advice on the correct sums that need to be insured, leaving the consumer vulnerable to choose sums insured that are inadequate for their circumstances.
We therefore encourage all our clients to seek professional financial advice from one of our financial planners before considering implementing an insurance solution. Financial advisers are trained professionals that know the products they recommend. Our senior financial adviser, Katriel Warlow-Shill, has over 12 years of experience as an insurance specialist and all our staff regularly meet with all the major Australian insurance providers to get updates and training. In order to protect your family and lifestyle it is essential that you seek quality advice from a trusted insurance adviser before you take out any life, total and permanent disability, and trauma and/or income protection policy. We offer a free comprehensive insurance needs analysis to determine the correct sums to be insured and source the most competitive insurance product tailored to your specific needs.
Please do not hesitate to contact our friendly office staff if you have any questions that we may assist you with. If any of your personal circumstances have changed, such as a change in income or growth in your family, then please let us know to ensure your details are up to date and your insurances adequately cover your needs.