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Is self-diagnosis best?

In this digital world, most of the things we want to buy are available online. Insurance policies are no different. In New Zealand, there are a number of websites that offer customers the opportunity to compare the different types of policies and their costs. One could almost think that financial advisers who specialise in insurance could be out of a job soon.

Here at Apex, we believe it is very positive for people to take charge and take an interest in their personal insurance. Being able to research insurance companies and the policies they offer online means that our clients are better informed.

And there are some great things about being able to purchase insurance online. You can sort your policy then and there when you are ready. People who don't have the time, or simply don't want to meet with a financial adviser, can finally 'get on to it' and get cover to protect their loved ones. Many of these websites also offer discounts on premiums for the first year of the policy.

Here are some of the potential risks of buying online.

Underinsuring yourself

We've found that one of the major issues with people buying their insurance online is that they tend to underinsure. It is easy to just take a guess and underestimate the amount of cover you will need. It is hard work to take out pen and paper and write down the things that are important to you and ask the hard questions.

For example, would you like to keep your family home? How about funds for the children's education? Would the remaining spouse be able to support the family? This only applies to life insurance, but for other types of policies like Income Protection or Trauma, the questions to be asked go deeper. A good place to start could be using a tool like the Financial Services Council Insurance Calculator.

Buying on price alone

Another risk of buying insurance online is the temptation to buy on price alone. It can be hard to compare apples with apples, as policy wordings are a challenging read for most of us. You might decide to go for a cheaper policy, but what are you really buying? And who will be there for you at claim time? Do you know that insurance companies have a financial strength rating?

So, is self-diagnosis the best option?

When deciding for yourself the level of cover you need, it is easy to make mistakes which could leave family members in the lurch. If your car broke down, and you are not a mechanic, would you attempt to fix it yourself? Like most things, talking to an expert gives you access to their knowledge – this is what they do day in and day out. A good financial adviser would recommend insurances that are suited to your personal circumstances, at no obligation to you and no guess work involved.