WHY COMPARING INSURANCE PRODUCTS CAN BE LIKE COMPARING APPLES WITH ORANGES (OR AN APACHE HELICOPTER)

 

If you believe the television, getting life insurance is as easy as picking up the phone and speaking to a beautiful young telephone operator who appears to be working in one of heaven’s serviced offices. She is happy to take your call, wants to only ask you a few questions and is smiling so widely you can almost feel the hug coming down the telephone line. Sadly, as somebody who has spent many years giving complex legal advice to insurance companies, I can assure you obtaining (good) insurance is not this easy.

The process of providing insurance is a business and like any business, it will only survive if its income is greater than its expenditure. That means an insurance company will only remain viable if they take more in premiums than they ever pay out to clients. Sounds fair right? However, in a competitive environment where insurance companies are vying for your money and creating cheaper products that seem more liberal to the consumer, how is it that insurance companies continue to turn a profit? I can tell you how, by making complex insurance terms that prevent people from claiming.

The devil is in the detail.

There is no ‘standard’ insurance product and no two insurance products are identical so as a consumer, trying to compare them can feel a bit like comparing apples with….well…. an apache helicopter. Neither one of them are similar so why try to compare them? The answer is….you have to. When considering insurance products not only do you need to consider price and value of insurance, you need to consider waiting periods on pre-existing conditions, definitions of pre-existing conditions, definitions on what constitutes an insurance trigger event and the list goes on.

There are research houses that will compare all these features of insurance products for you and then rate them helping you somewhat. This can be very useful but how they rank may not suit your individual needs. For example, just say you had a bad back. You may compare two funds which both have a clause not allowing you to claim for pre-existing injuries. One insurer’s definition of pre-existing may include your bad back, the other insurer’s definition may not. A general rating of insurance companies will not be able to tell you this and may not place emphasis on it in its rating system.

This is where a Financial Planner can add value to your insurance needs

A Financial Planner deals with these companies on a daily basis, they know their tricks and they know what is important. A Financial Planner can add substantial value in ensuring that you don’t receive a shock at time of claim. In addition, a Financial Planner should assist you with your claim should you need to make one and ensure the process runs smoothly, a valuable service particularly in time of need.

Just think about it, if insurance companies were always happy to pay claims do you think there would be so many lawyer’s ads on TV?

What about you, have you had any positive or negative experiences with insurance companies?

– This post is from Ben Brett. Check out our details in our about us page.

Posted in: Insurance and Ben Brett

About the author: Cara Brett

Cara Brett proudly heads up Bounce Financial - founded in 2014 after a successful, decade-long career in the financial services industry. Cara’s experience encompasses both the financial product and financial advice sides. This gives her a comprehensive and holistic knowledge of all facets of financial planning.