Direct Insurance v’s a Qualified Financial Adviser

Are you looking into life insurance for the first time? Not sure if you should go to companies directly or use a Financial Adviser?

It’s a life full of choices, and today there are more than ever. But are you falling for the marketing hype?  The fact is, on daytime television we are constantly bombarded with the option to call for quick and easy applications with no medicals. But what does that mean to you? 

• Poor Value for Money
• Higher Premiums
• Standard Exclusions
• Cost
• Tax Effectiveness
• Guarantee of payout
• Speed of implementation
• Management of claim

 Poor Value for Money

The most important reason for not going directly to the insurance company is that most of the comprehensive life insurance policies on offer to the public are only available through Financial Advisers. Insurance companies leave it up to life insurance advisers to talk to the clients about the products, run through the applications and help them through the process. That’s one of the reasons that the products that are on offer when you go directly tend to be poor value for money.

Direct or industry funds generally offer basic cover, without as many extra benefits available. Financial Advisers have access to products that have a wider range of features that can be tailored to your own individual preference and budget.

Higher Premiums

The Life insurance companies that sell direct products ask very few medical and occupational questions. With little questions asked, the insurance company is not able to fully underwrite your policy. This leads to insurer’s making assumptions about your health and charging higher premiums than they should.

With no medicals, the direct insurer has no option other than to price higher in anticipation of risks unknown. Many direct insurers hide behind a clause stating that ‘claims due to pre-existing conditions are not valid’.  On the other hand, products mostly recommended by an adviser will be fully underwritten at application stage allows you the peace of mind knowing that you are covered in full when a claim is made.

 

Standard Exclusions

Time poor individuals, or people who are uncomfortable with going through their entire medical history, are those who view the direct life insurance as a valid option. What they also don’t realise, besides a higher premium, is that there can be standard exclusions placed onto their policies.

There can be automatic exclusions for people with anything from mental health issues to diabetics. You may end up paying premiums for a product that doesn’t even cover you.   

Cost

 Direct cover is normally fully funded from your own cash flow, and often can be more expensive than a Financial Adviser sourced product.  However, single premiums can often be cheaper (typically Group Life cover).  An adviser can work with you, and look at ways of paying for your cover via superannuation, and using various linking options that reduce the overall cost to you.

Tax Effectiveness

Most direct insurance premiums, as they are funded from cash flow alone are only tax deductible for the income protection component. A Financial Adviser can show you how to pay for your insurance with multiple possible benefits depending on your circumstances.

Guarantee of payout

Direct insurance normally offers no guarantee that a payment will be made, as often these policies are underwritten at the time of claim. (See ‘Higher Premiums’ above). 

Speed of implementation

With direct insurance, there is no doubt that it is quicker.  There is a reason for that!

We will use your full financial profile to consider your actual needs and compare and match the products to your individual circumstances.   The Adviser then needs to research solutions for you and prepare a report outlining these. Paperwork needs to be completed and a Statement of Advice has to be produced for your agreement and your application needs to be assessed by an underwriter.  We ensure your policy goes into force as quickly and smoothly as possible, and we are there to ensure you have a hassle free process.

Management of claim

 Besides the obvious disadvantages of dealing with insurance companies directly, Financial Advisers at AFD Financial Solutions do all the hard word for you AND we are there with and for you to manage your claim as required.