Risks of buying life insurance online via discount brokers?

JohnTravoltage

I'm looking to buy some life insurance for myself and got quotes from a couple of online brokers (Moneyworld.com & Cavendish Online) which looked pretty reasonable. 

For a comparison, I also got quotes from a protection advisor. I was surprised to see the best quote from this person were over 70% higher than the best quotes from Moneyworld (which was identical to the best quote on Cavendish). Even for the same insurer, the protection advisor's quote was over 40% higher than that offered via Moneyworld/Cavendish. 

Everything else is apples to apples - same term, cover value, features. 

So it looks like a no-brainer to buy it via Moneyworld or Cavendish Online, but I'm wondering if there's a catch. 

Two questions:

1. Is there a risk of buying it myself (without advice) via online brokers in general? The advisor mentioned that the main reason why policies don't pay out is if the application form has been filled incorrectly when buying cover, and they do the due-diligence to ensure that this doesn't happen. My circumstances and medical history are pretty straightforward so I don't expect there to be any catastrophic errors in filling the form. 

2. Is there any feedback on Moneyworld or Cavendish Online specifically?

dunstonh

For a comparison, I also got quotes from a protection advisor. I was surprised to see the best quote from this person were over 70% higher than the best quotes from Moneyworld (which was identical to the best quote on Cavendish). Even for the same insurer, the protection advisor's quote was over 40% higher than that offered via Moneyworld/Cavendish. 

You would expect an adviser quote to be more expensive than a non-advised quote as the cost of advice and consumer protection has to be factored in. However, 70% sounds higher than I would expect to see.   That suggests there may have been product differences as well.   e.g., guaranteed premiums vs reviewable (or worse still, yearly renewal term assurance) or bolt ons included on the higher but not the lower.  Some providers offer a cut-down version for certain distribution channels, whereas their advised product would be better quality.  Although most don't nowadays.

1. Is there a risk of buying it myself (without advice) via online brokers in general? The advisor mentioned that the main reason why policies don't pay out is if the application form has been filled incorrectly when buying cover, and they do the due-diligence to ensure that this doesn't happen. My circumstances and medical history are pretty straightforward so I don't expect there to be any catastrophic errors in filling the form. 

There is some truth in what they are saying.  One insurer pulled out of offering protection policies via comparison sites because the amount of lies people were telling on the medical questions was far higher than on advised applications.   That is not a problem if you are truthful and have no medical issues.

JohnTravoltage

dunstonh said:

You would expect an adviser quote to be more expensive than a non-advised quote as the cost of advice and consumer protection has to be factored in. However, 70% sounds higher than I would expect to see.   That suggests there may have been product differences as well. 

I'll check the policy schedules and key facts but don't think they're substantially different products. 

I'd be fine with a 10-15% or even a 20% premium for the peace of mind of ensuring a specialist has looked at my application and my declarations, but 40-70% just feels too much. 

dunstonh said:

1. Is there a risk of buying it myself (without advice) via online brokers in general? The advisor mentioned that the main reason why policies don't pay out is if the application form has been filled incorrectly when buying cover, and they do the due-diligence to ensure that this doesn't happen. My circumstances and medical history are pretty straightforward so I don't expect there to be any catastrophic errors in filling the form. 

There is some truth in what they are saying.  One insurer pulled out of offering protection policies via comparison sites because the amount of lies people were telling on the medical questions was far higher than on advised applications.   That is not a problem if you are truthful and have no medical issues.

Fortunately, very straightforward medical history. Non-smoker, rarely drink, no family history of any chronic illness etc. I even got my medical records from my GP to make sure I wasn't inadvertently missing something I should be declaring. 

But don't know how far insurers go to undermine a claim if they need to pay out.

Would the pictures of my one-off hike in the Peak District be fished out from FB to say I was into adventure sports? Or pictures of me with a drink on New Year's Eve to say I enjoyed my drink (when in reality I only drink a handful of pints all through the year - and this is what I'll say on my application)?

Aretnap

JohnTravoltage said:

But don't know how far insurers go to undermine a claim if they need to pay out.

Would the pictures of my one-off hike in the Peak District be fished out from FB to say I was into adventure sports? Or pictures of me with a drink on New Year's Eve to say I enjoyed my drink (when in reality I only drink a handful of pints all through the year - and this is what I'll say on my application)?

Mostly they'd look at your medical records. If what you told your insurer about your drinking matches what you told your doctor, your family would be unlikely to encounter problems making a claim. In theory it could be refused if the insurer found.convincing evidence that you'd lied to both them and to your doctor, however a picture of you with a pint on New Year's Eve is not convincing evidence that you are a problem drinker.

It's a while since I applied for life insurance but my memory is that the insurer didn't ask about "adventure sports" (a hopelessly broad and vague term) but asked some pretty specific questions about rock-climbing, sky diving, scuba diving etc. Again they can't extrapolate from a picture of you going for a walk up Mam Tor to assuming that you were a regular rock climber.

Also note that life insurance is based on a snapshot of your health and lifestyle at the time of application, and to deny a claim your insurer would have to show that your answers were incorrect at the time of application. If ten years down the line you have a mid-life crisis and take up skydiving or start drinking two bottles of whisky a week they can't deny a claim on the ground that you didn't correctly declare these things on your application (though they might want to make further inquiries if you died in a sky-diving accident or of liver cirrhosis).