Philip Holland Financial Independence financialindependence

Don't get caught with a bad insurance product. There are so many options now available to consumers to choose from; flash TV adverts with celebrities, door to door sales people and large insurance providers invading your place of work.

So what is the differene between a ‘good' insurance policy and a ‘bad' one?

I will start with a short story. Donna* recently saw one of our advisers to fully review her medical insurance as she had had a claim declined. We reviewed the policy and found that it was a work-based scheme where there was a simple one page application form and the premiums are deducted from her pay automatically. Sounds easy.

Yes it was too easy as Donna discovered at claim time. These types of ‘easy to complete' insurance policies generally have one thing in common. That is they have a simple clause where any pre-existing medical conditions are excluded at claim time.

The problem here is that it gives no certainty at claim time. After all, you have insurance to pay you at claim time with little stress. Unfortunately for Donna, her medical condition was traced back a number of years and thus was declined as an existing condition.

So why is this story important? Sometimes the ‘easy option' is not always the best.

We always recommend consumers take the ‘longer road' when it comes to obtaining an insurance policy and receive advice and complete a full application form. This helps to ensure that you have certainty at claim time and not find out the hard way.

Thanks for reading my column during the year. On behalf of the Financial Independence team, we wish you a Merry Christmas and a prosperous 2012.

* Name changed to protect her privacy.

Philip Holland is the Managing Director for the Financial Independence group, Tauranga's leading specialist insurance and mortgage advisers. A Disclosure Statement is available free of charge on request. The opinions stated in this article are those of the writer and should not be taken as specific advice.