When it comes to life insurance there seems to be an endless list of ‘pain-free, no hassle’ insurance providers. They offer a simple over the phone service with no medical checks and in some cases no financial checks either. Some people think it’s a dream come true and others think it’s a little too good to be true. Unfortunately, when it comes to direct insurers (those who deal directly with their customers, not through an adviser) the devil is often in the detail.
Very quickly, direct insurers deal directly with clients. Retail insurers deal with clients through their advisers.
Price: More often than not, an insurance product that comes through a direct channel is more expensive than an insurance product you apply for through an adviser. It might sound a little bit backwards (surely you just cut out the middle man, didn’t you?) but the reality is that advisers save insurance companies time, money and ensure that a client has gone through full underwriting. All of this allows advisers to give more competitive prices than the direct insurers.
Product: Direct insurance products are generally not as comprehensive as their retail equivalents. It’s common to find that direct insurance will have automatic exclusions for things like mental health or self-harm, neither of which are automatically excluded by a retail policy. A few other examples of automatic exclusions we’ve seen:
– taking intoxicating liquor
– a dangerous occupation or pasttime
– all back injuries that keep you off work for less than 90 days
– any self-inflicted act, including exposing yourself to risk of sickness or injury for any reason.
These comments are so ambiguous it’s concerning and they are automatic exclusions that apply to all policies issued by the relevant direct insurers. None of these clauses are automatic in the retail insurance space.
Underwriting: Direct insurance often lets you avoid underwriting on the front end. You’ll see the advertising ‘no medicals, no blood tests!’ but as always, it’s not that simple. Underwriting will always take place, but some insurers don’t underwrite until you claim. This means you may be paying for cover that you think you have, but will ultimately be denied at claim time on the basis of a pre-existing or underlying condition.
Lastly, do you really want to rush something as important as your life insurance? We all want simplicity and we’re all time poor, but when it comes to insuring your life, why rush it at the risk of getting it wrong, leaving you empty handed when you really need it. Why not do it properly, potentially giving you a better price, with guidance from a qualified adviser, peace of mind from full underwriting and getting access to a better product?