You may have seen the ads on TV selling ‘Direct Life Insurance’ to consumers, promising guaranteed insurance cover without medicals and for less than the price of a cup of coffee per week! When things sound too good to be true, they usually are.
What is Direct Insurance?
Direct insurance is cover provided directly from an insurer online, through banks or TV advertising. They promise minimal or no medical questions which means you are not underwritten when you apply for the cover. The underwriting process will take place at time of claim meaning any pre-existing medical conditions may be excluded and they could decline your claim. So, you may essentially be paying premiums for years on something you cannot claim for.
What is Retail Insurance?
Retail Insurance cover is generally recommended through a financial adviser. Your adviser will assess your current financial situation to determine the appropriate level and type of cover you need. They will then compare a variety of insurers to find the best insurer and product for you.
You are underwritten at time of application, but this does not necessarily mean you have to do medicals. Your application is reviewed by the insurers underwriting team who assess whether further information is required from your doctor or they need a medical test performed. In the event a medical test is required, your adviser will arrange for a nurse to visit your home or work place free of charge to complete the required tests.
Clients are advised of any amended terms including loadings and exclusions before the commencement of a policy. Retail insurance also offers discounts on multi-life and multi-cover policies and rebates on insurance cover owned by superannuation.
What do I need to know about Direct Insurance?
People believe the premiums for direct insurance are cheaper because they do not involve a financial adviser. The premiums for direct insurance policies can actually cost you up to 30-50% more than ‘Retail Insurance’ policies. This is because insurance advisers and financial planners that use retail insurance have fought for lower premium rates for their clients.
When comparing direct insurance and retail insurance we found that direct insurance products have limitations on the benefits & features provided and often only offer basic cover with stepped premiums, comprehensive cover is unavailable as are Level premiums which do not increase as you age.
Direct insurance also does not take into account your personal circumstances, you could be taking out the incorrect level of cover that could leave you under insured & vulnerable in time of claim. At Quill, we sit down with you to analyse your financial needs to ensure the financial protection for you and your family in the event of sickness, injury or death.
What are the risks involved with direct insurance?
Direct insurance policies generally expire much earlier than retail insurance products. An example of this is ‘Life Cover’, direct insurance Life Cover products may expire at age 65 or 70 whereas retail insurance products will insure you until age 99 or even later. This can be a risk if you still have debt after the expiry age and would require insurance cover for a longer period.
Another risk is the pre-existing medical condition clause. As mentioned earlier, direct insurance is not underwritten. If you have, for example, hurt your back prior to applying for cover you may not be able to claim on your cover if the nature of your claim is due to a back injury.
If you are considering direct insurance, it would be advised to carefully read the insurers Product Disclosure Statement (PDS) for the limitations & exclusions and expiry ages before proceeding.
Contact Quill Group for your obligation free consultation.
We encourage all existing and potential clients to seek professional advice from our insurance specialist when considering insurance cover. Tony Marshall has over 15 years extensive insurance experience and can offer comprehensive insurance advice to you. We offer a free comprehensive insurance needs analysis to determine your insurance requirements and source the most competitive insurance product tailored to your specific needs.
If insurance is something you have been thinking about, please do not hesitate to contact our friendly staff to arrange a meeting to discuss your insurance needs.