Direct life insurance, taken online from a TV ad! That may be convenient – but can you rely on it to provide protection when needed?
We look at a range of issues that influence people’s decisions in relation to protecting their financial well-being, from –
- risks of ill health,
- accident –
- and even death; and
- we highlight some of the reasons to beware direct insurance reliance that is not well founded.
As the feature image to this article suggests, what we perceive we are buying may not be what we receive!
Life Insurance –
What is your reaction to that term when you see it?
You no doubt want your life insurance to behave to your best advantage. Do you understand how it works in providing protection for you and your family?
Some typical reactions are:
I don’t understand it (the different types of life insurance)
The application process is too complicated. (Personal health disclosure, medical reports, and/ or financial report requirements.)
I have family health history concerns that will preclude me getting cover. (I believe they could result in exclusions from full cover; or some premium ‘loading’)
It’s too expensive. (Perception without having compared the quotes under alternative strategies)
It never pays out. (Relying on sensationalist journalism of situations, usually where there has been questionable disclosure. Ignoring the impressive payout figures published by insurers annually.)
I’m not sure what cover I need. (Including issues such as
- the type of policy,
- the amount of cover,
- who should own the policy/ies; and
- who should benefit from it/ them)
I think my superannuation covers it. (Whilst this is often correct it is also the case that some such cover is jeopardised on a change of employment status. Other issues include that the cover –
- may reduce over time,
- may not pay out in all anticipated circumstances – other than to your superannuation account; and
- may not cover you for all that you expect,
- nor for as long)
I don’t need it. (A situation that could be difficult to confront with anxious dependants if that determination backfires at a financially inconvenient time.)
….and there are a number of other rather typical responses.
Recognising the complexity of this –
- but realising the importance of protecting the financial future of family and
- of any other financial dependants,
some turn to ‘direct’ providers to quickly arrange some level of cover – and at what appear to be competitive prices.
Beware direct insurance that isn’t always what it seems –
We suggest that the following matters need to be considered when adopting the ‘direct’ provider course. We conclude that –
- a negotiated-cost strategic advice process,
- implemented through a fully underwritten application
is in the best interest of anybody with financial responsibilities. The pros and cons of taking the direct route as we see them are:-
|
Pros |
Cons |
|
| Fast: only minimal information is taken | Uncertainty as to what is insured: absent under-writing at the time, there is a risk that existing conditions will preclude (or limit) claim success | |
| Relatively easy: many offer uncomplicated application processes | Claim risk from incomplete disclosure: where existing conditions give rise to a claim within a specified period, it may be declined | |
| Seemingly cheap: because of the ‘exclusion’ restrictions and absence of advice | False security: insured may believe they are adequately covered with the right policy, but have no certainty that this is correct | |
| (Hopefully) better than no insurance: if time erodes the risks for the insured | May prove to be No Insurance: where existing conditions are such that a claim will never be successful regardless of time |
The process of buying life insurance is complex and the product you are seeking to but needs to be understood. The MoneySmart website has a checklist on what to look for when buying life insurance –
- at this page, under the heading,
- ‘What to check before you buy life insurance’
The best approach
Whilst we suggest that readers beware direct insurance, we are open to discuss (or elaborate on) these matters further. If you would like to engage with us, we will shed light on possible personal outcomes for you. Our aim being to help you avoid the mistakes of taking the ‘quick and easy’ way to acquiring insurance cover.
At Continuum Financial Planners Pty Ltd, our mantra states that-
- we listen (to our clients), we understand (the financial challenges/ aspirations they have); and we have solutions (to their wealth protection dilemmas) –
that we deliver in personalised, professional wealth management advice, clearly documented.
To see how we can help you ensure that your insurance portfolio is appropriate to your needs and circumstances, arrange an appointment with one of our experienced team –
- by phoning our office on 07-34213456, or
- at your convenience, use the linked Book A Meeting facility.
(This article was first posted by us in September 2014. It has occasionally been updated/ refreshed, most recently in February 2025.)
