Five ways to beat insurers at their own game
Heavily loaded premiums may prompt you to consider going without cover, but by doing so, you risk leaving yourself financially exposed.
The better option is to understand how the system works, so you can play the insurers at their own game. One basic rule is to steer clear of cheaper companies.
Read the small print
“Consumers using a price comparison site will often opt for the cheapest premium, but these firms will be the strictest with their underwriting, as this is how they stay competitive,” says Peter Chadborn, a director of independent financial advisory firm CBK Colchester.
“You may well find that the insurers which appear fourth or fifth in the list are far more favourable. The initial quote from these firms may look more expensive, but they will not charge an added premium, which means the real price you pay after being underwritten is often lower,” he adds.
It’s also important to remember that underwriting decisions vary from company to company. “Some insurers will increase premiums for conditions such as high blood pressure or a high BMI, but others won’t,” says Matt Morris, senior policy adviser at protection broker LifeSearch.
“A disappointing answer from one insurer doesn’t mean the door is closed.” You should never just accept the first quote you get if you think it’s too steep.
“One client who applied for cheap life insurance through an aggregator site expected to get a standard rate of £30 a month for £400,000 of life cover, but was then quoted closer to £100 a month because of a loading,” Chadborn says.
“The client thought it was because of a health issue, but we discovered it was because he worked as a roofer. We were then able to get cover at a more reasonable £53 a month by approaching the right insurer.”
Similarly, if you are rejected by an insurer, an independent financial adviser can help find out precisely why, and which companies are more likely to offer cover.
“With breast cancer, for example, Aviva is more lenient,” says Lakey. “Some income protection insurers are also more ‘free thinking’. Shepherds Friendly Society offered income protection on normal terms to a female client with a BMI of 35, where several insurers wouldn’t even look at the application.”
When applying for general insurance products it’s important to review your choice of insurer regularly. “Just because your insurer was competitive last year, doesn’t mean it will still be this year,” says John Miles, business development director at gocompare.com.
The quick list
1. Don't get lured by the providers topping price comparison tables. Keep in mind the rule that the quote dubbed as the cheapest rarely turns out to be the cheapest for you.
Just as with low-cost airlines, there are several 'hidden' charges, and once you get the final quote it could be a lot more expensive or fail to give the right cover.
2. Always bear in mind that pricing varies massively from insurer to insurer. Just because you've been turned down by one provider doesn't mean you won't be able to get cover somewhere else.
The same goes for extortionate quotes – don't take them lying down, see if you can find a better deal elsewhere.
3. If you're having trouble finding affordable cover, seek the advice of a broker or specialist IFA. They will know which insurers would be best to approach, depending on your circumstances.
4. Lastly, when applying for protection insurance such as critical illness or income protection, you might find that any pre-existing medical conditions you have are excluded.
While this is not uncommon, there are concerns that, despite not getting the full cover, customers are still being charged the full premium. Check any exclusions and the price before signing on the dotted line.
5. Make sure you always provide the correct details. Twisting the truth may seem like a good way of saving, but you could find yourself in a lot of trouble if you have to claim and you're truth-tweaking is unearthed.
Generally thought of as being interchangeable with life assurance, but isn’t. Life insurance insures you for a specific period of time, at a premium fixed by your age, health and the amount the life is insured for. If you die while the policy is in force, the insurance company pays the claim. However, if you survive to the end of the term or cease paying the premiums, the policy is finished and has no remaining value whatsoever as it only has any value if you have a claim. For this reason, life insurance is much cheaper than life assurance (also called whole of life).
A financial adviser who is not tied to any financial services company (such as a bank or insurance company) and is authorised by the Financial Services Authority (FSA). They can advise on financial products to suit your circumstances. All IFAs have to give consumers the choice of paying by fees or commission and have to explain which would best suit the customer in that particular instance. Also, if commission is paid either by the client or the financial service provider recommended by the IFA, the IFA must disclose what that commission is.