The Pitfalls of Direct Insurance

We have met with a couple of people that had purchased insurance after seeing one of the multitude of TV advertisements.

We call this DIRECT INSURANCE as you typically deal direct with the insurer via a call centre.

The insurers have spent a lot of money in making the process as simple as they can, they will say “NO MEDICALS” “NO LENGTHY APPLICATIONS” INSTANT COVER”.

As a person that has worked in the life insurance industry for over 20 years, I found these statements rather confusing… how does an insurer offer cover without knowing the first thing about a persons medical history? After all insurance, by definition, is the sharing or pooling of a risk.

We asked the people we met to provide us with a copy of the product disclosure statement that they received when they applied for the cover. After reading through, we discovered that things are not always as they appear.

Contained in the disclosure statement were the words ‘PRE-EXISTING CONDITION” and how, ANY CONDITION that you have had, received advice or treatment for would be specifically EXCLUDED from the policy.

This raises the concern that you are not 100% sure what you ARE covered for until you make a claim… this is the worst possible time to discover that you are not in fact covered!

The insurance providers who are currently on our recommended list will ask a whole series of questions up front and may request medicals, financial information, blood tests or doctors reports, this may mean the application process is longer and perhaps more arduous, however, it provides certainty when you need to make a claim.

When making a claim with your insurance contract, you want to know what the process is and who you should speak with. At The Planning Room, we handle all aspects of our client’s claims, liaising with doctors and insurers to ensure our clients get the best possible outcome.

The direct option would see a call to the same call centre that handled your application and potentially a person with zero experience in this area.

Additionally, the direct channel does not offer any advice whatsoever. You may be unaware of the appropriateness of sum insured, type of cover, and who should own the contracts.

Rather surprisingly, we also discovered that the direct insurance offer was, on average 20% more expensive than the standard retail contract offering a similar level of cover.

In a nutshell, we urge people to have a look at what they have and seek the input of a professional insurance advisor who can assist with all aspects of your risk portfolio.

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