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Insurance – Shopping around? Pitfalls

Shopping Around for Insurance!

I had a client call me today and ask me some specific questions regarding Income protection. The truth of the matter is that we had conducted a review 7 months ago. It took me by surprise but when the client was satisfied with the answers, he told me that the real reason for calling me is because his friend had some questions with regards to income cover and he felt that calling me would answer the questions.

When I spoke to his friend the first thing he told me was that he was shopping around for income protection and he did some research and got stuck!

This prompted me to look at the basic problem of shopping for insurance and the problems one would encounter!

Lets face it, we want to do our own research and then look at talking to someone if we are sure of knowing what we want. I have endeavoured to highlight a few basic things that should be looked at while considering insurance of any kind and then we will highlight specific insurances under this category in the future posts.

 

Financial Strength Rating

This is the most obvious thing to look at with insurance companies. Will the insurance company be able to pay your claim? Do they have the money to deliver on their promise? Remember Christchurch earthquake? AMI was sold off!

While one insurance company buys another or someone comes along and buys off insurance companies and renames them all the time. So whats new??? Financial Strength rating gives you an inclination of stability for the foreseeable future.

Exclusions

Lets define exclusions- Insurance policy does not cover what ever is mentioned under this heading!

Remember the company which advertised customised home, content and car insurance… saying we ask you more questions and thats why we end up saving you more money! Lots of people got insurance with them due to the television ad.

Here is the thing the content cover excluded accidental damage unless you pay extra for it!

Life insurance does not cover suicide for the first 13 months!

Not all car insurance offers windscreen cover for free!

Not all home insurance provide full replacement for a fire claim!

So looking at whats not covered is as important as looking at whats covered. Simply put if anything in the exclusion list is important to you then there is no point looking at that insurance all together and narrows down your search.

Define your need

More often than not, most of my clients really don’t know what they need till we have completed a financial assessment and are able to recommend what they should consider. But when you are researching insurance on your own make sure to look at defining what you want out of the insurance. There are lot of options out there and while browsing we can easily get caught up with some features of some products that gets us fixated and then loose track of the entire process.

Things to do:

  1. Can I do without this insurance? This will answer the question what it will do for you!
  2. When I have, when will I be able to use it? Claims scenarios!
  3. How much can I afford?
  4. Will I be able to afford it in 3 or 5 years – Premiums keep going up!
  5. How long would I want to keep paying for the insurance.

Pricing

Comparing price of a product is part of the experience of retail therapy, insurance cannot be different.

Where to get pricing from?

For General insurance like home, content and car insurance you can get a quote from the website. Policy documents are usually available there too, so comparison of price and answering the above questions is easy.

For Life insurance and linked products there are websites that are now in play.

 

Pitfalls

Doing the above is definitely possible who can define their needs. Here is the problem do we think 10 or 20 or 50 years ahead. Can we expect to think that far and be sure that things will be so then?

While the future is moving towards online shopping and insurance will be a part of it too, but lets take time and highlight a few issues:

  1. Will it be enough? (At claims it is never enough, especially in case of stroke, cancer of death)
  2. Based on my finances, my income earning ability whats right for me?
  3. Have I covered majority of what-if’s?
  4. While I have done it all myself, claims are to be done by myself!
  5. Non-disclosure (Please see other posts talking about non-disclosure)
  6. Am I prepared (will, power of attorney etc_
  7. Am I entitled to tax savings or rebates on insurance? (Paying for 20 years may save some)
  8. Who is my advocate at times of claim.
  9. Will I get a second opinion from a friend or someone who specialises on the subject.

Well its easy for our clients to get in touch with us. Either call us or for a face to face experience they can see us over their phone or laptop.

If you feel that this post has raised some questions that need serious consideration and discussion, do not hesitate to email me on johar@anib.co.nz or call me on toll free 0800-456-427

 

See you again next week.

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