Life insurance costs vary drastically depending on where you buy it
Of course, some providers charge different rates to others according to the type of people they want to insure and what they perceive the risk of doing so might be.
And that’s where a whole of market broker can assist you in clearly explaining the costs of each provider and indeed the differences within those options to allow you to make up your mind what option is the correct one for you. But what about when insurers start to charge different prices according to how you come about their products?
You might assume this doesn’t happen. If an insurer charges one price to insure you then why would it be a different price if you applied elsewhere? Well the simple truth is prices may indeed vary, and vary quite considerably, even from the same insurer, depending on how you get to them.
And it’s not just differences in prices from the same providers to be watchful for. There are places out there offering life assurance products that can cost you a lot more than you need to pay for no other reason than.... well for no reason at all really. Just that they charge a lot more for something that you can get for a lot less elsewhere.
Now it’s worth pointing out that there can be variations in prices because of things like brokers such as I’m Insured, who choose to take less commission than they would otherwise be paid in order to reduce the amount that their customers pay in premiums. In effect we discount our provider’s premiums so that the price you pay is less. But that type of situation is a complete reverse of what this blog entry is all about.
Now, I’m guessing what you’re thinking at this point is, “stop being so vague and give some examples of what you are talking about.” So here you go;
To you and I, one business doing business with another business makes sense for both businesses. However, does it make sense for the customers involved? It would seem, when life assurance is concerned, certainly not always. Why? Well, because there are numerous high street financial institutions out there who have formed some of these commercial relationships with household name insurance providers and for some reason, as soon as that takes place, the price of their insurance products rises.
Now a typical scenario for someone changing their life assurance product is when they are arranging a mortgage or remortgage. Why? Well, because it makes sense to make sure your cover is adequate to you mortgage arrangements. But it is typically this kind of scenario that can cost you more in the pocket than you may need to spend. Some of the most prolific mortgage lenders in the UK (the ones you see advertising on the TV a lot), are not just keen for you mortgage business but also your life assurance business.
Now while their mortgage rates are very competitive, they are often ‘tied’ to a single life assurance provider. A tied relationship means one company will only use the other to provide life assurance and will not look at the whole of the market. Now that isn’t necessarily the end of the world. But what if that mortgage provider and insurer have decided that rather than charge their customers the standard charge for the life assurance policy, they will increase it, sometimes buy as much as 30%? *
This may seem madness, and to us at I’m Insured it is. But it happens on a regular basis and it may well have happened to you. But why does it happen and why do people let it happen? Well, there are a couple of things that immediately spring to mind. And bear in mind this doesn’t just apply to life assurance but may also be the case for critical illness cover and indeed income protection.
Firstly, when you’re arranging a mortgage, let’s face it, that’s the thing that holds the most importance in your mind. Life assurance is often a secondary thought. You are thinking in terms of, “will we be accepted for the mortgage or wont we.” Probably not, “I really hope we get the life assurance, and it’ll be great if we can get that great mortgage rate as well.”
Secondly, convenience... It’s very often a condition of a mortgage offer that the person or people applying have adequate cover in place to repay the mortgage should the worst happen. So when that topic of conversation arises during a meeting with the individual arranging the mortgage and they offer you an option to tick that box right there and then, many people think, “why not.”
It’s at that point where you can find yourself in a situation of being offered a product that is of a tied nature. Be it with a company the mortgage provider has a commercial relationship with or indeed one that they actually own. That’s right, a life assurance provider that the company selling you the mortgage owns! Doesn’t sound like the best recipe for a good deal?
A third thought (and something that should absolutely never happen but unfortunately does), is the old trick of being conservative with the truth. Remember the scenario where a mortgage provider says they will give you the mortgage but a condition is that you get some life cover in place as well?
Well what if that mortgage provider or perhaps more specifically one of their representatives, alluded to it being required that you buy that cover from the source they were offering it from and indeed not telling you perhaps a more accurate description of the situation i.e. that you need some cover to get the mortgage but rather than be told where you can buy it from it’s actually up to you to decide where you get it, so long as you do?
Now, there are a small number of mortgage providers out there who will indeed tell you that in order to get a mortgage, you need to buy their life assurance. But they are getting few and far between now. Unfortunately in our experience, the situations involving truth conservation seem still to be more wide spread.
Now, it’s not up to us to tell you what you should and shouldn’t be doing with your financial arrangements. In fact we don’t give any advice on the topic. We are here as a broker with access to a wide panel of life assurance, critical illness cover and income protection products and endeavour to provide you with the information you need to make the choice of product, cost and provider that is right for you.
But that doesn’t stop us getting really worked up when we see people spending way in excess of what they need to spend on a product that we could very often offer from the exact same provider at a reduced cost. And, before you think it, I’m not talking about a watered down product with the same company logo on the top of the page. I’m talking about the exact same product, from the same provider. The only difference it the premium.
And don’t just take our word for it. Although we seem to spend a lot of our time talking to people and spreading the very same message as above, there also seems to be others out there who have cottoned on to the same thing;
So what to do? It’s quite simple really. If you are offered a life assurance product in connection with another financial product or indeed you decide to approach an institution you have perhaps used for a while (such as the bank you have your current account with), to arrange some cover for whatever reason, it is not going to be a bad idea to check what they can get you against the whole of the market.
That is, of course, where I’m Insured comes in. And don’t worry, we will give you all the facts and information you ask us for but none of the pressure that so very often comes with it. We are you see, great believers in letting people make up their own minds in their own time about what they wish to do once they are confident they have all the facts to do so.
by Gwilym Pugh
Mar 18, 2014
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