(This post continues from 13 Signs You’re Getting Bad Insurance Advice (Part 1).)
The recent CFP v Couper court case showed you could get insurance advice that leaves you uninsured and unprotected.
Here are 7 more signs you’re getting bad insurance advice:
7. You were referred to your advisor by bank staff
Many banks pay their tellers a bonus for referring you to a financial advisor. This bonus is often dependent on you proceeding with advice, or buying a bank product. These types of bonus arrangements can put indirect pressure on your advisor to win your business, sometimes at the expense of your best interests.
CFP v Couper showed evidence the referring staff member was checking up on the progress of the insurance advice. The expectations of a referring staff member can make it even harder for an advisor to tell you to not to change anything.
8. Your Statement of Advice isn’t personalised
Your financial plan should contain tailored explanations of how the advice suits your particular needs. You should see paragraphs that reflect the conversations you had with your advisor about your personal circumstances. If you feel you are reading the same financial plan as your advisor’s last client, you probably are.
9. Your financial plan lacks a detailed analysis of the level of cover you need
A common sign your advisor is rushing to the application stage: a lack of detailed analysis of what levels of cover you need.
Even if you request a particular level of cover, your advisor is legally obligated to show you what levels you should have, and warn you about being under insured
10. You weren’t taken step-by-step through your Statement of Advice
A sign you should run for the door: your advisor asks you to sign a Statement of Advice without having walked you through each page and given you time to digest everything.
11. You don’t understand your advice or are uncomfortable with something
It’s your advisors job to make sure you understand the advice and are comfortable proceeding. If they can’t explain everything and you still feel unsure after raising your concerns, you could seek a second opinion.
12. Your advisor rushes to a product recommendation before understanding your personal needs
Your advisor shouldn’t even begin to talk about specific insurance products until they have discussed your personal needs in detail. Depending on the insurance, this discussion could take an hour or more. After that meeting, your advisor should be conducting research, comparing all the options and coming back to you with a recommendation.
In most cases, any product recommendation should not be made until you are presented with the Statement of Advice. Your advisor recommending a specific product just after the initial discussion is a sign they have not done the proper research or considered all products available. As a result, this insurance may not suit your needs or be the best one for you.
And perhaps most important…
13. Your advisor didn’t get you to check the medical statement given to the insurer
Many advisors use an online application, where you give verbal answers to a health and lifestyle questionnaire and your advisor records your responses.
There is a possibility information is left out, either innocently, or because your advisor didn’t feel it was relevant (as in CFP v Couper).
When you sign the application document, you are agreeing that you have checked your answers. Most people don’t actually do this, but you should.
Possibly the biggest risk to an insurance claim being paid in the future comes from your advisor failing to record all your information properly at application time.
Just remember 2 things: (1) a commission based advisor is more likely to be paid if you have no medical issues and (2) they are recording your answers and sending your information to the insurer. So check your medical and lifestyle statement (best practice is for the recommended insurer to collect your health and lifestyle statement directly from you, either using an online form that you complete and submit directly, or telephone interview).
Click here to read Part 1 of 13 Signs You’re Getting Bad Insurance Advice.
Contact me if you have questions or need advice.