I am regularly asked to review the insurance needs of my clients’ friends, family and business associates; and in doing so I have noticed a disturbing trend. This is that many people are blissfully unaware of some issues within their existing cover.
The five mistakes I find so common are:
1. Under Insurance
New Zealand has a massive under insurance problem. Why is it that *98% of homes and 95% of cars are insured, while only 57% of the population have life insurance and 20% income protection? Does this mean that we value material things more than ourselves and our family?
Probably not, however it is clear that people are unaware of the options available to ensure a strong financial future in the event of a major health issue.
During insurance reviews many new clients are alarmed at the inadequacy of their existing cover to maintain their lifestyle and provide for their family.
2. Paying Too Much
Why would you want to pay more than you need to? Frequently when I review clients who have purchased an insurance policy, they are surprised to find out that it is costing considerably more than a comparable or sometimes even better policy. This is usually due to the person being oversold by a salesperson (who was more concerned with commission) rather than an adviser who is client focussed, and fully involved the client in the decision making process.
3. Inferior Policies and Poor advice
They say “nothing is more constant than change”. And this is particularly true of insurance policies. Often when I am discussing the needs of a client, it is amazing to see how things have changed for them. Insurance companies seek to address this change and improve policies offered to the market. Often these improvements can be passed on to the client at no additional cost and can be as easy as the simple completion of a short form to upgrade the existing policy. The aim of an insurance adviser should be to provide clients the best outcome at claim time – for it is then that the rubber meets the road.
4. Over Insured
Sometimes I do meet clients who have too much insurance (albeit rare), and the unfortunate thing is that this is usually due to their needs not being matched by the appropriate level of cover or the fact that their situation and requirements have changed. It is always best to complete a full needs analysis, and review on a regular basis, so all areas of risk can be discussed and a “Plan B” can be developed to meet those needs. I do however stand by the fact that for a client – “there is never enough money at claim time”. It’s a fact that *46% of people believe that having the right amount of insurance is important, but only 22% said they regularly review their cover!
5. Claim Time Surprise
My aim is to communicate effectively my suggestion for a comprehensive risk plan so that each client understands what they are covered for and what will happen with respect to a benefit payment at claim time. Too often I meet people who think they are covered for an event, when in reality they are not. Much of this can all be avoided by having a process that is client focussed, clearly communicated and regularly reviewed.
So, what is needed to address all of these issues?
Firstly, an individually tailored plan which is based on the needs, goals and priorities of the client.
Secondly, regular reviews to ensure that the plan stays relevant and appropriate.
The Last Word
Each individual client and situation requires specific personalised advice to establish the best method to achieve the desired financial protection and risk management goals. Always seek specialist advice from an Authorised Financial Adviser.
Published on Monday, February 18th, 2013, under Latest News