There has recently been a significant increase in the number of advertisements on TV selling ‘quick & easy’ risk insurance with supposedly very low premiums.
They promise a ‘no questions asked’ approach, with no underwriting hassles and no time-consuming ‘full medical history’ questions. They almost guarantee that the consumer will be granted cover, and that it will cost them ‘the same as the price of a cup of coffee a week’.
Unfortunately the low premium claim is often not true. They may actually charge up to two times more than retail insurers for the same level of cover.
The reason they charge more is because when insurers don't fully assess risk – as in the case of the TV insurers – they charge higher premiums to protect themselves.
TV insurance is simple and convenient because they ask just three or four health related questions – and that is usually not enough for the insurer to know if it is safe for them to insure that person.
As a result, they often charge significantly more than what a fully underwritten insurance policy would cost. They may also include waivers which allow them to reserve the right to obtain full medical information at the time of a claim - and they may then decide if they are going to pay out the claimant or just refund their premiums and may state that they would not have insured them in the first place if they had done proper underwriting.
In other words, some people who buy this insurance on the TV may not actually be insured. They just won’t know that until they or their family make a claim.
Disclaimer: Unless otherwise indicated, the information in this email is provided by Australian Unity Personal Financial Services Limited ABN 26 098 725 145 AFSL 234459. This information has been prepared without taking into account of the investment objectives, financial situation, tax position or particular needs of any individual person. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs.