Issues with Increasing Insurance Limits

Cynicaloflife on 16/11/2022 - 16:38
Last edited 16/11/2022 - 16:41

Hi All,

When I just finished Uni, I purchased Insurance (Life, TPD, Income Protection, Trauma etc) through a financial advisor. The initial limits were set based on my salary/wages.

Since then my wages have increased and I would like to increase my insurance limit.

However, the financial advisor is charging me nearly 1K to implement this increase. Is this normal within the insurance industry?

I was not aware that there would be a significant charge to implement this change when I initially signed up.

I would like to increase my limit but would like to keep the costs minimal.

Any suggestions would be appreciated!

Thanks!

Financial Insurance

Comments

  • 87percent on 16/11/2022 - 16:52

    Sounds like a lot. I was looking into seeing a new financial planner, and it was about $4-$500 mark

    • Cynicaloflife on 16/11/2022 - 17:34

      Do you know anyone that cheap in Perth?

      • 87percent on 16/11/2022 - 19:08

        Sorry, this was in Melbourne.

  • tsunamisurfer on 16/11/2022 - 16:53
    +2

    I was not aware that there would be a significant charge to implement this change when I initially signed up.

    Wasn't this outlined in the statement that adviser drafted out for you? They are required to disclose their fees.

    Did your adviser draft a Statement of Advice for you?

    Overall doing this type of insurance at the beginning of your career (assuming that you are of a younger age) is not great value for money. I would just go the simple way and go through your Super (unless you have some specific risks you need to mitigate).

    At this age you may not have a mortgage, no dependants etc so your risk would likely be lower.

    • Cynicaloflife on 16/11/2022 - 17:28

      It was my parents that got me signed up to this. I just trusted them.

      Setting up the initial insurance was free however to increase the limit. For e.g. increase life insurance from 250k to 1 million is where the advisor is charging me.

      They have drafted me a statement of fees and I haven’t decided yet. Hence this post.

      Is it better to get a second policy and avoid the fee altogether?

  • Ocker on 16/11/2022 - 17:10
    +4

    Assuming you are single with minimal debts do you really need life insurance?

  • Kail on 16/11/2022 - 17:31
    +1

    You can get income protection and total disability insurance through your Super fund.

    I would not get life/death insurance unless you are married, in a long term relationship with shared debts (e.g. mortgage), or have a child.

  • brendanm on 16/11/2022 - 18:31

    As above, are you single, no dependents? Or married with kids?

  • ihbh on 16/11/2022 - 19:36

    Threaten to switch to a competitor (but at the same time check out their offering) and see what the cost reduces to? Can you go direct?

  • bobbified on 17/11/2022 - 09:35

    Ask: "How much would it cost to cancel the existing cover and start a new policy …. with another financial advisor?". If he's smart, he'd get the hint!

    The commission for new insurance policies are huge - sometimes up to the entire first year's premium - I wouldn't be surprised if the FP says it's better to start a new policy. No real downsides for you, but he would get a bigger commission for a new policy than an existing one.

  • wei13 on 17/11/2022 - 09:45

    If you want to use the FA's service, then pay their fees. Otherwise, if you want to keep costs minimal, then do it yourself. Spend time reading about the different insurances and the options/nuances, then deal with insurers yourself. Not sure why you want to pay an FA every time your pay goes up, or you need more life insurance to cover debt.

    Also, worth noting is that when you increase your cover, the increased amount is usually treated as a new insurance application and requires re-assessment by the insurer. That might explain the FA's fees.

    Be cautious of using insurance through super without knowing what it actually covers for.

    I'll help start you off. Does your life insurance cover any cause of death, or have exclusions? Does your TPD cover require you to be disabled from any occupation you could possibly do, or just your own occupation? What is your income protections waiting period, and how long does the cover go for once you start claiming?

    Note: not tax advice.

  • bobbified on 17/11/2022 - 10:43

    Since then my wages have increased and I would like to increase my insurance limit.

    If you take up Death/TPD and Income Protection cover in your super, the insured amounts get recalculated each year at review time (1 July) if the amounts are based on your salary (some funds only have fixed amounts) up to the Automatic Acceptance Limit, without the need to be underwritten.

    The added bonus of it is the premiums come out of your super so that can aid your present cashflow. Downside is, there's an extra layer of approval from the Trustees in the event of a claim which could take slightly longer (but most trustees will approve once the insurer approves and vice versa) .

    Trauma insurance is not often offered in Super so you will likely need to take that as a separate policy.

  • autonomate on 17/11/2022 - 18:36

    DM me your annual or monthly, which provider and your salary/age. I'll let you know how much premium you're paying for the advisor. Financial advisors are generally good for advice, but if you're on this website - chances are you should be handling the admin side of things yourself. Take the recommendations and shop around for similar.

    Yes, the advisor will want less of your business - but you shouldn't be seeing one regularly. If you needed to, you wouldn't be here.

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