In insurance

Direct vs Advised Insurance


In your greatest hour of need, will a direct insurance policy pay out?

Quite often I meet with new clients who have, at some time in their lives, purchased a ‘direct’ insurance policy after seeing one of the many TV advertisements that promote comprehensive cover.

The lure of the ads is irresistible! They promise an easy, quick process with no medical tests needed and instant cover offered. They use extremely persuasive and emotive language that leads people to believe that after spending five minutes of their time on the phone, with no invasive and personal questions asked, they can secure the insurance they need.

Just to be clear, I believe some insurance is better than no insurance. But, people need to be more tuned in to the reality that insurances provided through direct insurance channels are not individually tailored – they are effectively like buying a one-size-fits-all, off the shelf product.

So why is this a potential issue?

The reason why buying an income protection, TPD, trauma or Life insurance product via an insurance call centre (direct insurance) is so easy is that there is NO upfront underwriting.

What that means is that the direct insurance channel asks limited questions about a person’s medical history and pre-existing conditions at the time of securing the cover. I can guarantee that within the fine print of the product disclosure statement will include terms like ‘pre-existing condition’ and ‘exclusion’. (If you have a policy like this and think you are covered, dig out that PDS and check the fine print).

For you, that’s a big risk. You really don’t have 100% peace of mind that you are covered for serious injury or illness – in fact, you won’t know until you need to make a claim. And that is the worst time to find out that you have been paying premiums for a policy that may not pay your claim.

To add insult to injury, the cost of direct insurance, compared with a comparative retail policy which is fully underwritten at the time of taking out the policy, can be more expensive.

At DSAS, we understand the complexities of risk insurance. Yes, the process will take longer than a half hour phone call and the insurance providers we work with will want full disclosure from you of your health and medical history.

An adviser working with you will also tailor your contract, guiding you through often confusing choices regarding the benefits and costs of a policy. The direct channel won’t give you any advice enlightening you on the difference between a level and stepped premium, or whether you can pay for some insurance from your superannuation to minimise cash flow pressure.

This results in a couple of meetings and a thorough analysis of your individual situation – and a comprehensive strategy outlined in a Statement of Advice (SoA) document that details your options and makes recommendations. This is a really good thing – it means you can work with us to understand exactly what your contract does and importantly, does not, cover you for BEFORE you agree to proceed.

Advised insurance will also mean that if you ever need to make a claim, you have a professional in your corner to liaise with insurers and doctors on your behalf and manage your claim to get you the best possible outcome.

And because life changes – an annual review and regular contact gives you access to well informed, professional advice, relevant to you. That’s the additional value of advised insurance compared with direct, which may or may not be worth the paper it’s written on.

– Duane Stewart

pitfalls of direct insurance
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