Making Cents: Shop around to pick up right life insurance for you

There are many reasons why lots of people don’t have all the financial products and cover which advisers recommend

we have, with cost often a key concern.

A recent survey for the Competition and Consumer Protection Commission found that only 20% of us have a regular savings account, despite a majority expressing a desire to save money.

An even smaller proportion are following advice when it comes to life cover. The commission found that by the time people reach their late 30s and early 40s, fewer than one-fifth have begun pension savings.

However, while most of those surveyed would undoubtedly name affordability as the reason they don’t have these products, myths and prejudices can also play a part.

Independent Irish insurance broker Nick McGowan of Lion.ie undertook his own survey recently, relating specifically to life cover, and found people don’t trust insurers to follow through with payouts.

About 58% of respondents thought insurers don’t pay out at least four in 10 death claims — a myth that Mr McGowan is anxious to dispel.

“People think that the insurers are locked away in dungeons dreaming of ways not to honour claims, but the truth is very different,” he said.

“In most cases, insurers pay out over 90% of the time — and if they don’t pay out, it’s usually because the applicant lied on the form or because of a pre-existing condition.”

The Lion.ie survey showed 75% of life insurance application that are rejected are because of a health condition while the other 25% is because the applicant didn’t tell the truth on their application.

False impressions like this one about payouts can have a huge impact on whether people have a product or not, 62% of people surveyed don’t have life insurance.

Oftentimes people also delay because they think it will cost more than it actually does. 39% of responders said they didn’t have cover because it was too expensive but the majority of those who did have cover were spending €10 to €40 a month on their policy.

Examples like this show how people’s decisions can be affected by incorrect information, with potentially serious consequences for their long-term future. 36% of those surveyed relied on recommendations from friends and families.

While loved ones may have your absolute best interests at heart, they may be passing on information that was correct for their situation but not necessarily for you. Products and their costs can also change significantly over time so if you feel you may need a particular product, do some research yourself to find out prices and options.

In the instance of life insurance, 59% of respondents wanted cover to safeguard their family’s future, while an overwhelming majority (89%) believe that life cover is a necessity if you have children.

“The majority of people getting life insurance have a family or they’re buying a house and settling down,” says Mr McGowan.

“They want to know that if anything were to happen, their family would be protected, which is why life insurance is so important.”

This also chimes with another finding of the commission, which suggested that the influence of friends and family diminishes as we get older but does not disappear.

“The importance we place on seeking financial advice increases as we grow older, and there is agreement across all age brackets that people should seek financial advice when making big decisions,” the commission found.

For those still worried about the life cover application process, Lion.ie found that only 5% of applications were declined or postponed, and lying on the form, a health issue, or being overweight were the reasons why. Even if you have a pre-existing condition, this doesn’t mean you have no chance of getting cover.

“Weight, raised cholesterol, high blood pressure, mental health and other pre-existing conditions are treated differently by the insurers,” Mr McGowan said.