Over at insurance firm Prudential, its chief customer officer Goh Theng Kiat told me that the firm’s customers prefer buying life policies through an insurance agent despite the rise in online channels for direct purchase.
Prudential, like most life insurance companies, offers DPIs.
“They (use an agent) after building trust and confidence with their agent, who help them understand the different types of insurance plans available, ensuring peace of mind for them and their loved ones,” Mr Goh said.
Mr Timothy Ho, co-founder and managing editor of investing website Dollars and Sense, said that one reason for people preferring to buy through an insurance agent is that life insurance has complex terms that may not be clear to average consumers.
“An agent can help tailor these policies to individual needs, ensuring that buyers fully understand what they’re getting, any potential exclusions, and how the coverage fits into their overall financial plan,” he added.
Another downside to DPIs is that they have limited coverage.
The maximum coverage of a whole-life DPI – which covers you for life – is S$400,000 (US$297,000). A term-life DPI – which covers you for a specific period of time – has a maximum coverage of S$200,000.
Experts and insurance companies said that this regulatory limit is because of the lack of financial advice provided, for instance.
There are no limits for life insurance policies bought through insurance agents – though insurance companies will consider someone’s age and salary, among other things, when setting the coverage.
Mr Ooi said that consumers could buy multiple DPIs to increase their coverage, but he advised that it might be cheaper to buy a single policy through an insurance agent.
Buying multiple DPIs would also mean doing so from multiple insurers, which would complicate the claim process, he added.
Mr Ooi suggested that DPIs may work as “supplementary insurance” to increase your coverage without needing to adjust your existing insurance policies.
READING THE FINE PRINT
If someone ultimately decides to buy a DPI, what should they do?
Mr Ho said that as with any insurance policy, it is important to review the terms and conditions carefully. He said that some things to look out for include exclusions and understanding what the policy covers.
Ms Dawn Cher, writer at personal finance website SG Budget Babe, said: “The problem with insurance policies is that they are very complicated, because different policies and insurers cover different things. That’s why you need to look carefully at the terms and conditions and decide what you need.”
She added that people also need to look carefully at the premium cost and how it will increase over time so as to properly budget for it.
Beyond that, people have to understand the policies they buy and what they cover well. This is so that they do not buy too many policies or do not buy enough to cover certain needs such as critical illness, Ms Cher said.
To ensure that clients have no issue claiming from their DPI if needed, Mr Ooi said that people need to declare their health status accurately.
Should an insurance company discover that a person has an underlying condition, the company may choose to void the insurance policy. This means that the client might not have any life insurance coverage.
