We are all keen for a bargain when we can get one, and getting personal insurance cover is no different. But the reality is that jumping on board with a policy because of a special offer is rarely a good move in the long term, and as we have discussed before personal insurance, be it income protection, life insurance or health insurance, is a long term game.
The famous Stanford marshmallow experiment of the 1960s looked at delayed gratification. A child was offered a choice between one small reward provided immediately or two small rewards if they waited for a short period. One third of the children were able to delay long enough to get their reward.
While we would like to think that we are all smarter than a child offered a marshmallow, one of our brokers recently confessed to refinancing their mortgage because they wanted the TV that was on offer. The immediate, tangible reward or saving right in front of us is hard to ignore for savings further down the road.
There are issues we come across again and again where people have chased the bargain and set themselves up for higher premiums or less thorough cover when they need it. While some of it we have said before, it is important enough that it bears repeating.
Beware the banks
We have heard of banks offering a discount on a mortgage rate if the mortgagee takes out their home, contents and personal insurance with the bank. At a time when you are looking at committing to a mortgage that is a fairly compelling offer.
But is it worth it?
Banks in particular have a less than stellar record with insurance. ANZ for example has a 36 month exclusion for suicide*, which is three times longer than the industry standard of 12 months, and an unlawful acts exclusion which is not an industry standard.
Insurance policies sold through banks also tend to cost you more in premiums than policies bought through a broker.
Watch out online
Buying insurance online can be appealing because it can be faster and seem more straightforward than visiting an insurance broker, and there are often promotions that look good. However the cover provided by online insurance companies rarely stacks up to that offered by brokers and the premiums are often higher. If you sign up during a special offer they can increase dramatically after a set period.
When you get a quote on personal insurance from a broker you will get a ten year projection on the premiums, so you have a good idea of what you are getting yourself into.
Ideally you should be changing policies as little as possible, as anytime you have to reapply you may have exclusions added as the result of changes in your health or lifestyle, which means you shouldn’t just jump from special offer to special offer.
The devil is in the details
While all the ins and outs of a policy are right there in the fine print, even if you read it do you know how it compares to other policies? We do. When you get a quote from us we know what is in the fine print of each of the policies we recommend for you, and can talk you through how these can impact you.
If something sounds too good to be true, or appears dramatically cheaper than other options there is usually a reason for that. If you feel you are being pressured into buying insurance from the bank take the time to talk to a broker about your other options. While you will end up with better quality of coverage through a broker you may find by looking at the ten year projections you save more than you would have through a lower mortgage rate anyway. Remember, there is a fine line between financial coercion and a financial incentive, one of which is illegal.
If you want to talk to someone, who has read all the fine print, about getting the best personal insurance cover for your circumstances, call one of our brokers today.
* As stated in “ANZ Life & Living Insurance Policy Document, 13 September 2015”
Here are a few reviews from some of our existing clients around New Zealand