When it comes to buying insurance it can be tempting to buy based on cost alone, but in the long run this can prove to be a false economy. Jo breaks down why.
As a consumer and financial advisor, I often find myself wondering, “If I were to purchase a product like a car, a fridge or a washing machine, would I ever just be buying it for the price only?” Or, would I first compare the price, features, looks, history, and receive recommendations before I purchased the product? Definitely the latter!
I then ask myself if the same should apply when buying insurance, which involves entering into an important, long-term financial contract… and of course my answer is still yes.
Why is it then that so often when people are buying insurance online, over the phone or through a super fund, they select a product based on price alone? Especially given that this can be disastrous at claim time if the budget product chosen fails to pay out when it’s most needed.
The reason this happens is almost always because people have failed to take into account the factors they would consider in choosing almost any other product—the insurance product’s features and benefits!
Buying insurance online without comparing its features and benefits is like buying a car without test-driving it first. The reason you test drive a car before you buy is so that you can look at the features and decide if it does what the manual and salesperson says it does and then decide if you wish to pay more for additional features or are happy to go without and stick with the basics. The way to “test-drive” your insurance is by carefully comparing all of the features and benefits and finding out about the experiences other consumers have had with the product.
Here at IAS we are, sadly, constantly hearing from people who have purchased insurance online or from their superannuation provider without comparing the features first, only to realise they have purchased a product with minimal or no features and benefits, as a result of selecting only on price! Needless to say, this can be catastrophic.
Assuming that all life insurance, income cover, trauma insurance, business interruption insurance, and home and contents cover products are the same as each other is a grave mistake. It can put you in a very sticky situation indeed at claim time when you find out that what you assumed was included in your cover was far from the truth.
As financial advisors we have a great advantage when comparing products as we have software that can compare every product and its features across the whole market in a matter of seconds. Even as an insurance professional I wouldn’t personally like to be trying to do this by reading every single Product Disclosure Statement separately!
Unfortunately, the sad truth is that when it comes to financial products, the only way providers can reduce the cost of a product and make it significantly cheaper than that of competitors is to strip the features away. If consumers are happy to understand this fact and are ok with having a contract with less features for a reduced price, then I’m all in favour of online purchasing. However, most consumers are not fully aware of the features of the product that they are purchasing and could greatly benefit from professional advice before they buy.
For more information or advice call us on (02) 8268 2900 for an obligation-free chat.