Buying Insurance From Your Bank vs Through an Adviser: Three Real Differences

That policy you picked up alongside your mortgage at the bank — do you remember which insurer it is with? Could you say what it covers, or how you would claim on it?

Most insurance sold by a bank is not the bank’s own product. They act as agent for one insurer. Compared with buying through an adviser there are three real differences: you only get one company’s products, nobody looks after you after the sale, and nobody reviews the policy as your life changes. And an adviser’s service costs you nothing.

A friend’s experience

A friend of mine unloaded about this recently. Years ago, while arranging a loan at the bank, he was sold a policy. Several years on he cannot remember which insurer it is with and does not know what it covers. Worst of all, if he ever actually needed it, he would have no idea how to claim or who to claim from.

He has paid every premium and received none of the service. Plenty of people are in the same position, so here is what actually differs.

Difference 1: a bank acts for one insurer

A bank will not quote you across several companies, and it will not give you advice shaped around your circumstances.

Every household has a different structure, age profile, mortgage and health history, so the right product is different too. No single product suits everyone. An adviser typically acts for several insurers and can build around your situation.

Difference 2: banks sell, they do not service

After the sale, any question you have is yours to take to the insurer. When you claim, you negotiate with the insurer yourself.

An adviser acts for you in dealing with the insurer. Whenever there is a question or a claim, it is one phone call.

One of my clients had held trauma cover for just over a year and had a minor procedure that he thought nothing of. Listening to him describe it, I recognised that it met the definition for a partial trauma payment. I put the claim in for him and he received tens of thousands of dollars. Had that policy come from a bank, he would almost certainly never have claimed it.

Difference 3: is anyone looking after your policy?

This is the important one. Is your policy reviewed regularly? Or have two or three years gone by without you remembering what is covered and for how much?

Our risks keep changing. The mortgage goes up or down, a child arrives, you change jobs, the premium rises. Is a policy set up ten years ago still right for the life you have now? Cover needs to move as the risk moves, and an adviser reviews it with you.

If you would like a sense of what a review actually looks at, this is how I decide who in a family should be insured first.

The part that matters most: none of this costs you anything

An adviser is paid by the insurer, not by you. My fees and commission structure are set out in full in our disclosure statement.

If you are holding a policy you bought at a bank and are not quite sure what it covers, send it to me. I will tell you what it actually covers, whether it is enough, and whether you are paying too much.

Want someone to look over the policy you already have? Get in touch with Cornerstone Insurance.

Phone: +64 211 280 727 Email: amy.tao@cornerstonefs.co.nz WeChat: Amytaoingrace