Insurance advice

Life insurance includes income protection insurance as well as insurance against the risks of death, injury or serious illness. It can be complicated so your adviser will ask you lots of questions to help work out the best option for you.

Many advisers will work with more than one company. Expect them to tell you about their experiences with each company. What is their claims process for example, and how good have they been at paying out?

If you have pre-existing conditions, you’ll need to be up-front about this. Your adviser will be able to tell you how an insurer underwrites such conditions and whether you might have to wait for a period before cover starts.

Ask questions about the premiums you will pay and whether they are likely to increase. Ask what is best for your age and whether there are ways to reduce premiums by reducing some of the cover you receive.

For example, some types of income protection insurance offer payments for two or five years instead of to age 65 or 70. Advisers can tell you how likely it is you would need cover for longer periods.

Talk with your adviser about whether there are certain illnesses you particularly want to insure against. You may decide a less comprehensive (for example cancer only) critical care or trauma insurance would give you enough protection.

See our life insurance page for other general information about things to think about when buying life and other personal insurances.

Your adviser may recommend you change from one insurance policy to another.

Changing your policy or provider needs to be carefully worked through. You may gain some benefits (such as a reduced premium) but you need to make sure you won’t also lose some benefits. For example, you could have a claim denied that might have been accepted under your original policy.

When recommending you change from one product to another your adviser should be able to explain different options clearly. They must explain if the new product is suitable and if it has any exclusions or limitations.

For example, if you’re changing your life or health insurance, they should tell you if there is any reduction in cover (or no cover) for pre-existing conditions that are covered under your existing insurance.

If they can’t provide a specific comparison (for example, if they don’t have the competence, knowledge and skill to comment on other providers’ products), ask them to explain this.  They should also explain the types of risks involved with changing products so you can investigate this further yourself or get a different opinion if you wish.

Most insurance advisers receive commission - they receive a payment from the insurance provider as a percentage of your premium. If you have complex insurance requirements, they may also charge a fee for analysing your needs and producing a plan for you.

A commission means you won’t have to pay directly, the commission is paid to the adviser by the company selling the product – such as an insurance policy. Commission costs are built into the premium charged to you. It’s important you know how the adviser is paid so the commission arrangement doesn’t put the adviser’s payment ahead of your best interests.

It’s good to shop around to get a good view of the wider market and what kind of deals are offered elsewhere.

Advisers can receive different types of commissions or other incentives:

• An upfront commission. This can be as high as 200% of the annual premium, including bonus commissions.
• A trail commission for each subsequent year. This could range from 5 to 25% depending on how much upfront commission is charged. Our 2016 review of insurance advisers found that most advisers charge a higher upfront commission and a lower ongoing trail commission.
• ‘Soft’ commissions which include tickets to sporting events, small value gifts and others.

Even if you buy your insurance online (for example, through a comparison website) the pricing will typically include a commission. Some insurance companies do offer a commission discount if you deal with them directly.

Ask if there is a charge for cancelling your policy within a specified period. Some insurers have a ‘clawback’ period which means if you do cancel within this time (usually two years) your adviser must repay a portion of the upfront commission. Some advisers may pass this charge on to their customer.