The Advantage of Using a Broker
As we head into the future, Australia’s life insurance market is evolving. Cities across the country like Melbourne & Brisbane are growing, with more people finding themselves with incomes worth protecting. People realise the financial risks posed to their family in the event life takes a turn.
However, it’s not all good news. More people are buying life insurance and have the income to protect their family, yes. But they’re not all spending it wisely. One study by Rice Warner Actuaries in 2011 estimated that 95% of Australians didn’t have life insurance of a satisfying standard. There are a few trends that are making financially smart people go for the wrong option. One of the biggest reasons is how they go about choosing the packages they pay for.
A study from Noble Oak done at the start 2017 found that more people are getting life insurance advice from the internet. A third of Australians get their information strictly from the internet, while 25% follow friends and family members. Just a quarter of life insurance customers are using real financial advisors like brokers. On one hand, it’s a good thing that people are willing to take direct control of important financial decisions. On the other hand, it doesn’t always work out great for them. The Life Insurance Customer Group recently published that people who do go directly online for life insurance without a broker get rejected from claiming on their policy 71% more often than those who use advisers.
It’s no small issue that more Australians are ending up under-insured or paying for coverage they don’t need. The boom in direct life insurance sales is helping some, but putting a significant amount of people at risk. For those people and for the people who aware of the risks of going directly to providers, life insurance brokers could be exactly the kind of friend they are looking for. From the head of the family looking to protect their loved ones to the business owner enjoying the growth of industry in urban centres like Brisbane who wants their key people looked after, there are advisers suited to helping life insurance customers of all kinds. Let’s take a look at the benefits and why they make brokers a much wiser choice than buying direct.
Price is a significant concern when looking at the different levels of coverage available. When people hear that going for direct insurance deals can be cheaper, they might be tempted to ignore the implications and take what deal they can get. The reason these deals are cheaper, however, is often that they don’t provide the coverage that customers really need. Any benefits of a cheaper deal evaporate when a claim is rejected because you weren’t covered when you thought you were.
When you buy with the advice of a broker, the only reason you are going to be paying more is that you’re going to be getting the right level of cover. Good life insurance brokers won’t try to tempt you with low-cost deals that you get no use out of. In fact, some research shows that brokers can often find better deals thanks to the different rates they often get from providers.
Focus on the consumer
It always pays to be sceptical of the services you pay for, including life insurance. Businesses are profit driven and we don’t want to assume that a consumer will be prioritised over profit. For brokers, their profit isn’t based on selling you something and leaving. It’s based on providing advice not just when you’re buying insurance, but long after. A broker will make sure that you’re happy with the deal well after you’ve already signed up and will help you find alternatives if your needs change.
Brokers represent the options different companies provide, but they work for you, not the companies. They have one objective and one profit motive: your best interests.
Interpreting the jargon
1/3rd of Australian households don’t have life insurance. There are some who don’t think about it all that often, but more are aware of the need for protection but simply unable to properly navigate the market. Direct life insurance sellers are making some efforts to simplify the jargon but it’s not enough and in doing so, they risk missing the intricacies of a policy that could prove to be a deal-breaker.
Advisers like brokers are vastly more experienced at accurately translating jargon to make things much easier to understand for customers of all kinds. Brokers are easier to get in touch with, too, answering personal queries and specific circumstances where direct providers tend to falter.
Knowing you, knowing needs
One of the biggest reasons that people end up with inadequate coverage is because of the nature of direct insurance deals. A lot of providers taking that route aren’t as thorough when it comes to finding out your income details, your attitude to risk, and things like your medical history.
A life insurance broker will want to know these details because they know how it impacts your needs and the different deals on offer. This includes the provision of policy riders like double indemnity, which has the insurer paying out double to your loved ones in specific circumstances. Most buyers don’t know that many of these optional riders even exist.
When to use a life insurance broker
The benefits of using brokers are clear. If you’re starting a family and you need to know that they’re going to be looked after, you should use them. If you have a specific job or lifestyle brings about a certain level of risk and you’re concerned you might need specialised cover, you should use them. If you’re running a business and you rely on key people and losing them could negatively impact the business, you should use them. There’s a lot more to gain than there is to lose by getting some expert advice on your insurance choices.
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