Page 92 - Smart Money

Chapter 4

We review our insurance policies for our clients every two years
as a minimum, we suggest every year. It doesn’t necessarily
mean that we change anything; we just review it in the market
to make sure it still represents good value and it is still appropriate
and doing what you want it to do.

From the opposite perspective, you should also consider financial
windfalls. An easy example is winning lotto. It’s rare, but if you win lotto
you might be in a position where you don’t need insurance anymore
because you have repaid the debt and now have a significant savings
amount. Inheritance is a similar situation. So over time, as you work,
you reduce your debt, and increase your super and savings. You raise the
kids and ultimately the kids move out of home, so the need for insurance
naturally should diminish over time. There is an end point, but we always
say that the need for insurance doesn’t expire until you no longer need
the insurance, and that is what our review discussions aim to ascertain.

Talk to your broker about their insurance - what their speciality is, what
their credentials are, whether they are a Certified Financial Planner,
whether they are members of the industry body, the financial planning
association. How do they get paid? Are they paid via commission? Are they
paid by fee for service? Who are they aligned with? Are they owned by
or influenced by their licensee? For example, if they are aligned with one
of the major banks, then they are probably going to promote that major
bank’s insurance products, whether they are the best in the market or
not. Also, do they get extra commissions or extra loadings or incentives
to recommend a certain provider over other providers, because that may
influence their decision making as well.

That is how we suggest you approach someone initially, and obviously,
you should ask them if there is a fee involved for the initial advice. If you
are shopping around and want to speak to two or three different advisers,
you might end up paying two or three lots of fees for one lot of advice.

As part of their role, a financial planner should be an insurance person
as well. Not everyone is; some planners are specialists in certain fields,

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