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Life insurance at the click of a mouse
By
Diana Clement NZ Herald Saturday June 1, 2013
Point, click and insure your life. Many Kiwis who need it don't
have life insurance. If you're one of them, the problem can be solved in
10 minutes if you have access to the internet.
Buying life
insurance online is increasingly common. The Warehouse, LifeDirect,
Pinnacle Life and others offer insurance that can be bought completely
online, provided you have reasonably normal health.
Insurance can
be complex and sometimes it's best to seek advice from a financial
adviser who lives and breathes insurance. But many people find the
process of buying insurance intimidating, says Peter Neilson, chief
executive of the Financial Services Council.
Neilson, whose
organisation represents both financial advisers and the direct life
insurers, says most Kiwis don't have adequate insurance and "any channel
that finds a way to get to more people in a way they are comfortable
with is a good idea".
Online insurer Pinnacle Life says its
statistics show females have a preference for buying insurance online.
"With the majority of financial advisers in the industry being male, we
suspect this statistic has to do with the value female applicants put on
the privacy of their health information," says Ed Saul, a Pinnacle Life
partner.
It takes 10-15 minutes to buy life insurance online provided you
have information about your health to hand. You will be asked a series
of questions about your health and lifestyle and if the answers are
straightforward you will be offered a policy electronically.
It
is still possible to get life insurance online if you have a
pre-existing or hereditary medical condition. The Warehouse online
application, for example, asks reasonably in-depth questions and for
many conditions it can still provide an instant quote.
I had a
bit of a play around this week and The Warehouse website loaded the
premiums according to the boxes I ticked. In one I answered
hypothetically that a close relative had been diagnosed with multiple
sclerosis and it added over $90 to the monthly premium. If the medical
conditions are too complex the application is forwarded to underwriter
Sovereign.
The most important thing with life insurance is to
answer the health and lifestyle questions fully and honestly. If not,
you may be paying for nothing. It's also essential no matter how you buy
insurance to read the policy from cover to cover.
Some financial
advisers tut tut at online insurance. Yet the online application
process is very similar to the exercise financial advisers go through
with clients. I'm not convinced people are likely to be any more
truthful or take the process more seriously in the presence of a
financial adviser than they would be online. They may, however, be made
aware of more alternatives to the policy they are looking at.
Saul
agrees. "Generally, we see more complete disclosure of medical
information from applications received directly online versus
applications filled by third-party advisers. This may be because
applicants filling out the application without an adviser may tend
towards being overly cautious. In any event, the outcome is positive for
both the insurer and the applicant."
Another advantage of buying
online, says Phil Devlin, general manager of financial services at the
Warehouse, is that customers can do their applications in their own
time, which might be 9pm at night when the children have gone to bed, or
6am.
There are downsides to buying life, health, trauma and
income protection insurance online. These policies are complex and not
always easy to understand.
One of the problems with life
insurance is working out how much you need - although most people buy
what they can afford, not what they need. Consumer has a free life
insurance calculator on its website at
Consumer.org.nz/reports/life-insurance/calculator that takes into
account your outgoings and how much your beneficiaries would need if you
died.
Neilson says what a person "needs" isn't just about the
dollar sum of cover. They might need life insurance combined with income
or mortgage protection and a funeral benefit. Or it could be a
combination of life and trauma (lump sum payment on diagnosis of certain
illnesses) insurance.
One of the disadvantages of buying life
insurance online is there can be less flexibility and fewer additional
options. For example, you might want to have both you and your partner
covered. Or, in many cases people choose policies that have add-ons for
income protection, medical/health and trauma cover. Not all online
insurers offer this. At the Warehouse, for example, that's not possible
at present. The policies offered by LifeDirect do, however, include
options for health and/or trauma cover.
People buy separate
policies. Usually, however, there are discounts to be had by lumping
them together. Therefore buying life insurance from one provider and
income or mortgage protection from another may end up being no cheaper
than a policy bought through a financial adviser.
Another big
advantage of buying through a financial adviser is that he or she can
lodge the claim with the insurance company on your behalf (or your
beneficiaries' behalf) and be your advocate. That can be helpful if
there is a problem and you need someone to go into bat for you. For the
record, LifeDirect does do that for its clients, but with other online
policies you or your beneficiaries may have to do the legwork of the
claim.
Price is a factor in some people's decision to buy online.
Devlin says although the Warehouse's life policy is identical to ASB's
and both are underwritten by Sovereign, his policy is cheaper. That's
because the Warehouse takes a smaller commission from Sovereign than ASB
does, he says.
I tested the online quoting system for three of
the websites this week and the monthly premiums for me were all in the
$30s. For the same level of cover and terms and conditions FidelityLife,
Asteron Life and Tower were all charging in the $40s - or $120 a year
more.
Whether the extra cost of buying through an adviser is
worth it depends on policy wording, your need for advice and how
important it is to have someone else liaising with the insurance company
on your behalf.
Not all policies are created equal and the devil
is sometimes in the wording. Interestingly, LifeDirect, which doesn't
offer its own insurance but sells standard life insurance policies for
OnePath, AMP, Sovereign and other leading insurance companies, says most
of those policies are similar. All have just one exclusion, suicide
within the first 13 months.
Other policies may have more
exclusions. Pinnacle Life excluded journalists (and military personnel)
who are deployed overseas. The BNZ's LifeCare policy excludes
involvement in an unlawful act. If, for example, you died as a result of
drink driving, the underwriter may not pay out, whereas most of the
other policies mentioned in this article would in that circumstance.
It's
also worth considering whether the policy you're buying allows you to
increase your cover to a certain level without further medical
questions. You may have, for example, suffered a heart attack, but need
more cover because you now have a family and a bigger mortgage. Of the
policies on LifeDirect only AMP didn't offer automatic increases.
Some policies may waive premium benefits if you're unable to work because of disability.
Another
issue is when the life insurance pays out. Does it pay out when you're
diagnosed with a terminal illness and are expected to die within a
certain number of months or just when you die? Will an advance be paid
to your loved ones on your death to pay for funeral expenses?
Very
few life insurance claims are declined. "In just over six years of
selling life insurance online, we have only declined two claims," says
Saul. "Both cases involved blatant non-disclosure." One had failed to
declare that he was in renal failure and receiving dialysis when he
applied for the insurance and the other one failed to declare that he
was receiving treatment for diabetes, high blood pressure and high
cholesterol.
News: Life Insurance appeals to all
Life insurance is increasingly finding a place in the
financial planning of Americans young and old, according to research
from Northwestern Mutual. The findings show that the motivation behind
obtaining life insurance and planning future financial security are
quite different by age and lifestyle. The research is the final of a
three-part series offering insights into financial planning across
generations.
The poll found that:
-
Younger Americans – those who are 18 – 34 years old – who have life
insurance are most likely to have purchased life insurance due to the
birth of a child than those age 55+ (28 percent versus 16 percent
respectively)
-
More than a one third (36 percent) of Americans 55+ years old who
have life insurance were prompted to buy life insurance as a result of
marriage and 31 percent were prompted as part of a retirement plan
-
45 – 54 year olds who have life insurance were prompted by marriage
(39 percent), followed by retirement planning (25 percent) and
homeownership (25 percent). This group had the highest percentage than
any other age group when asked how secure they feel as a result of
owning life insurance (69 percent)
"It is important to have a financial plan that can both support you
and evolve across the span of your lifetime as your financial situation
changes. Life insurance can be a stable and yet flexible cornerstone of a
financial plan – protection if you need it while also helping you meet
financial goals at various life stages," said David Simbro, senior vice president at Northwestern Mutual.
When asked what provides Americans with the greatest peace of mind, the generations once again stood apart:
-
18 – 34 years olds (35 percent) are significantly more likely than
those ages 35-54 to have peace of mind as a result of knowing all their
debts are paid
-
Both 35 – 44 (34 percent) year olds and 45 – 54 (36 percent) years
olds derive the greatest peace of mind knowing that their family will be
provided for in the event of their unexpected death, and those aged
18-34 (68 percent) and 45-54 (58 percent) who have life insurance were
significantly more likely to have been motivated to purchase life
insurance in order to provide for their loved ones
-
Those who are 55+ (31 percent) find the most peace of mind in knowing that they will have enough money to live in retirement
"The differences between the generations further underscore that the
opportunities and risks people face changes over time, as does what it
takes for them to feel secure. Young people focus on building wealth and
paying down debt, while those heading into retirement are concerned
with managing their longevity risk. This is why it is critical that a
long-term financial plan have built-in flexibility," said Simbro.
Source: PR Newswire Association LLC