ProtectionFeb 25 2014

Six things you need to know about switching protection

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      CPD
      Approx.30min
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      CPD
      Approx.30min
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      CPD
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      Some call it churning, others prefer to say re-broking - either way a lot of it continues to take place in the protection market.

      Switching a client to a better - or similar but less expensive - plan is often good advice and is exactly what a good broker is often expected to do. Churning clients, however, to an inferior product just to generate new revenue for the adviser or their business runs the risk of significant consumer detriment.

      The important question when it comes to protection is how exactly does an adviser know if the new policy is better than the existing one?

      There are various tools out there to help advisers, with some new ones on the way, but short of reading both policy documents in full it is not always easy, especially where health issues could be concerned.

      The critical illness market in particular has seen dozens of positive changes in recent years, but does that mean that all new plans are better than all the old ones? The answer is quite probably not as it is never quite that simple.

      It is also far too simplistic to say that the cheaper plan is always better by default just because it costs less. People want the cheapest deal when all else is the same, but when products vary the role of the adviser becomes significantly more important.

      It is also far too simplistic to say that the cheaper plan is always better by default just because it costs less.

      Here I’m going to take a look at the six key pros and cons of switching protection plans.

      1. Life cover

      Just like all sorts of products many people regularly switch their life insurance provider in order to save money. Thousands of people switch their utility providers each year and many do the same with the life cover.

      On the whole the cost of life insurance has been falling for decades (G-day aside more recently for the ladies) and as the process has gradually been made quicker and easier with the creation of online applications and simplified underwriting, many people can switch and be covered by a new policy on the same day.

      All things considered, and subject to some of the caveats below, switching life cover to save money is generally fine.

      2. Critical Illness Cover

      While life cover is relatively simple, switching CI cover is a potential minefield.

      Sometimes it may seem almost impossible to make a decision that is 100 per cent right, which is because often it is a case of losing one thing in order to gain another.

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