Comparing Apples With Apples

Comparing Apples With Apples
Oct 2, 2017

When offered a better deal on your life insurance from a bank or other financial institution, beware, it could look like a saving but how does the policy compare to your existing one? Are you comparing apples with apples?

 I received an email from a long standing client last week saying that they had been offered a great deal for life insurance through their bank. In simple terms, the bank recommended they increase their life and trauma cover slightly with the benefit of saving a few dollars a month.

Luckily the client contacted us regarding cancelling their existing cover, as we were then able to highlight the differences between this and the bank recommendations. The bank had not done a comparison against their existing cover to highlight differences, which would have enabled the client to make an informed choice. This is something an AFA (Authorised Financial Adviser) would do as a standard compliance procedure.

In simple terms, the bank made a recommendation whereby the consequences to the client could have been massive as the clients existing cover provided:- 

  • Life insurance where the premiums are ‘level’ and do not increase as they get older
  • Trauma insurance that covered 35 conditions (compared to the 7 conditions covered by the bank policy)
  • Trauma insurance that would not reduce their life insurance benefit in the event of a claim
  • Free trauma insurance for their children

In this case, the bank had clearly not acted in the clients’ best interests. And whilst banks are unfortunately not subject to the same Code of Professional Conduct that us AFA’s have to adhere to, they do have to ensure that clients receive adequate protection

Insurance wording can be confusing, as most insurers/banks offer policies with similar names. However, the benefits and wordings vary greatly, and a replacement policy may offer the ‘same type’ of cover but not necessarily the same benefits.

Imagine the situation if our clients had cancelled their existing cover and changed to the Bank’s policy, only to find out in the future that a claim wasn’t covered or their premiums had sky rocketed.

So, if you think you are getting the deal of the century from your bank, make sure you are comparing “apples with apples” and talk to an Authorised Financial Adviser, rather than a bank employee, to make sure you get a proper comparison. Getting it wrong can prove to be very expensive and as I have been told on many occasions “buying cheap can cost you more”.