1. Cheap insurance can be dangerous.
With insurance, as with everything else, you get what you pay for. Why should insurance be any different? Life insurance in particular is important because it is designed to protect your nearest and dearest. It is also designed to protect your greatest assets.
Unfortunately, insurance in Australia is regulated in a different way to superannuation, consumer lending and even basic banking. These financial sectors have got very specific acts governing them and less wiggle room. The insurance industry has a few grey areas and corporations, especially ones who offer the cheap direct insurance, are taking advantage of people everywhere.
Why? Well, quite simply put, the truth is that almost all cheap insurances have got pre-existing condition clauses. It’s so easy to get a quote because they’re not doing a real risk assessment on you, they’re merely categorising you into basic premium rate categories.
The complex and annoying process of underwriting is super annoying because it means you need to get blood tests and medical certifications. It also means that insurers know what they’re getting into risk-wise, can add exclusions but you can have peace of mind about being covered for everything in your policy.
The bottom line is that I’ve seen a direct insurer I worked for in the past decline a person’s disability claim for their stroke because they went to the doctors once for a headache twenty years before that.
2. Insurance is not something to just ‘set and forget’
Here are some common stages of life that many people experience:
- Finishing school
- Graduating from higher or specialised education
- Starting your first job
- Getting married
- Progressing in your career
- Buying the family home
- Investing in assets for income
- Having children
- Children growing up
- Medical issues and expenses
Obviously not everyone will have children or invest, but insurance needs to be adjusted according to your current personal circumstances. A risk advisor can help you work out how much you need to protect what’s important to you.
Many don’t even charge money for their services as Insurance companies pay them in commission. You can request to see their calculations, so you can rest assured that you don’t have an insurance gap.
You should get your insurance reviewed every time your circumstances change. A high quality risk advisor will check to see if anything’s changed. If you’ve had another child, gotten married or bought a house, it is definitely worth revisiting your advisor.
3. Your premiums don’t need to get much more expensive every year.
That’s right, there’s a thing called a “level” premium, where the insurance company won’t increase your rates based on your age. Other premium increases will still keep coming through (for example, if all policies get more expensive by 20% due to administration becoming 20% more expensive across the whole company), but your age won’t affect your premium.
Level premiums are especially cheap for younger people, and these policies get more expensive to start as you get older. This is because you’re perceived as less of a risk for the insurance company if you are younger. This can pay off when you’re older and have a level premium policy from when you’re younger.
As always, do your research and ensure that you’re speaking to a qualified professional. Make sure that whatever you get is suitable for your circumstances. Don’t be afraid of making some enquiries and speaking to multiple advisors until you find one that you trust.