Chances are you're familiar with comparison sites that let you compare the cost of different products. On one hand, these websites, or “aggregators” as they're known in the industry, can help consumers make important choices. But recent research shows they're no substitute for the support of a financial advisor – especially when it comes to selecting life cover.
The internet has changed many aspects of our lives, and while there was a time when consumers had to phone around different life insurance companies to get indicative quotes on premiums, these days there's a whole raft of comparison websites that can do the job with just a few keystrokes.
But convenience often comes at a cost, and study by actuaries Rice Warner1 found serious shortcomings among comparison sites when it comes to life insurance.
To begin with, Rice Warner looked into the remuneration structure of comparison sites and found “most receive a similar commission to qualified financial advisers. Consequently, we would expect them to offer a level of services which closely matches those provided by a financial adviser”. However, if you've ever used a comparison site, you'll know this is unlikely to be the case.
Comparison sites do compare different product features, though the focus is on price. As Rice Warner noted, “The inadequate link between price and product features is likely to result in consumers overlooking what is being offered for the price they pay”.
In other words, you may save on premiums but it can be a case of false economy if you're not getting the product that's right for you – something you or your family may only discover at claim time.
Meeting the needs of real people
Rice Warner also found the online tools that allow consumers to work out how much cover they need vary greatly between comparison sites. By contrast, the study noted, “Financial advisers will provide their clients with a tailored recommendation for insurance needs which is likely to set a level of cover which better meets the needs of the individual.”
And when it comes to claims, comparison sites don't offer much help at all. Rice Warner noted that they offer no information on how consumers will be helped if they need to lodge claims, stating, “This is a clear disadvantage compared with using a financial adviser who is expected to help their clients through the full cycle of the life insurance policy.”
Plenty at stake
The bottom line is that there is too much at stake with life insurance to make a decision based on a comparison site. Only a financial adviser understands your needs and circumstances, and that's exactly what's required to determine which policy is right for you.
To know if you have the right level – and type – of life cover in place for your needs, please contact Mortgage Choice Financial Planning today.