Switching To Another Insurer

Thinking about changing your life insurance provider? Consumers are being warned that it is not something that should be done lightly. Get it wrong and you could lose significant benefits.

It is important that customers gave thought to why they wanted to switch to a new life insurer. It's not like changing your power company, where if you find one that is slightly cheaper or offers better service you can switch and then switch back if you need to. With life insurance, any changes in your health since your last policy was taken out are taken into account."

Customer movement is a big issue for the life insurance industry at the moment. A high upfront commissions being paid to insurance agents were driving behaviour that was detrimental to consumers, and making premiums more expensive. There are claims that up to 80 per cent of customers' decisions to move between insurers are based on price.

It is important to understand the implications of a move. If you develop any health conditions, it can be hard to move without losing cover for those.  If you develop a condition once you have moved, you might be stuck.

If you have an abnormal prostate test result, this will be taken into account when you apply for cover in the future. This could result in an exclusion being applied for any prostate-related conditions including prostate cancer, higher premiums for your new cover, or deferral of your application until the cause of the abnormal result has been found. For products which exclude cover for pre-existing conditions, you may not have cover for any condition which relates to that test result.

A cheaper premium sometimes signalled a less extensive product. Does your new policy give the same, less or more cover and benefits? If your premiums are less, has your cover been reduced as certain conditions are excluded? If your new cover offers more benefits, are they benefits you're more likely to need – more benefits does not always mean better cover.

If the cover was identical the price of a policy would be a factor in the decision. But when an event occurs, it's not going to be a good event, you want to make sure the company is there to pay out. It should be fit for purpose. There's no point having insurance that's not going to do what you want it to do.

It was important to understand policy wordings, he said. Some insurers have different definitions of what constitutes health events such as a heart attack.

Most insurers include a 90-day stand-down period in their policies, from the time the policy issued until the cover fully kicks in. That means if something happens during that time, you may not be covered.

To avoid the possibility of three months with no cover, you can consider keeping your old policy active until the stand down period on the new policy is complete. Or you can talk to your adviser about asking the new provider to waive the stand down period.

Ninety days doesn't sound a lot when you're healthy but if on day five you find a lump and you want to get it checked, you wouldn't want to wait 85 days.

People needed to take advice before they signed an insurance contract. It can be the longest contract you will sign in your life. You could have it for 50 or 60 years, so you need to make the right decision long-term, not just for the next six months.

Sometimes it is possible to negotiate changes to your existing policy, instead of moving.