Loyal customers are not rewarded by cheaper insurance premiums
Do you like to listen to music? Great. Here's something that may be music to your ears.
One phone call to a financial adviser could save you hundreds of pounds, perhaps even more.
Why? This is because you may be handing out more money every month than you need to – money which, as they say, is as good to you as it is to them.
The cost of insurance with many of the major companies has reduced significantly over recent decades, and you could get a cheaper deal by starting a new policy, even though you are a bit older! (You still don't look a day over 21, by the way.)
This is great, if you are young and thinking of insuring yourself now. The average age in the UK for taking out life insurance is 31, because people tend to insure themselves around the time when they get married, or start a family.
On the other hand, if you have an older insurance policy that you've been paying for 20 or 30 years, then you may be paying rates that were set in the Middle Ages, when your joints weren't hurting yet, and premiums were higher.
This was highlighted recently in The Sunday Times, which reported that insurance customers are routinely ‘punished for loyalty' with hefty premiums far in excess of what a new customer would get.
One customer at one of the leading high street companies cancelled his home insurance, because it was going up every year, and he felt it was too expensive. A month later, when he rang back for a quote as a ‘new' customer, he found that he'd been paying 205 per cent more than a first time customer signing up today.
He had originally been offered to renew at £1,361, but as a ‘new' customer, he was offered £496 – plus £50 cashback!
Even the financial regulator has got into a tizzy about this stuff: the Financial Conduct Authority (FCA), always delicate in its choice of words, expressed ‘frustration' at the behaviour of financial services companies towards long-standing clients. Well, if the FCA is ‘frustrated', that means WE should be ‘furious'.
Incidentally, the ultimate insult: the customer above phoned his insurance company to complain, and was told he ‘should have shopped around'. And that was probably after 30 minutes on hold, listening to music jingles and being told all advisers were busy.
The theme of shopping around has been in the news quite a bit lately, and not just with regard to insurances.
In this esteemed column we reported lately that the FCA warned consumers buying financial services against simply taking ‘the line of least resistance' by accepting the first offer that comes along. This usually means the products of their existing financial provider.
Better to enlist the help of a qualified, independent financial adviser who can help you exercise your ‘Open Market Option', the term used to describe your right to shop around. Taking the first insurance policy, the first service to help you access your pension savings, or the first annuity from your existing pension company is, more than likely, far from the best option out there on the open market.
This case of annuities is an interesting example. The annuity is the policy you buy with your pension savings to convert them into a regular income for life. Many people prefer the security of a dependable and permanent source of income, rather than taking slices of their savings as lump sums.
However, on any given day there can be 30 per cent of a difference between the best and the worst standard annuity rates on the market.
What your pensions provider may not tell you is that an annuity is possibly the only financial product where failing health can get you a better deal!
If you are a smoker, or have other lifestyle issues that the actuaries believe are likely to shorten your lifespan, then you may be eligible for an ‘enhanced annuity', which gives you a better monthly income based on the cheerful fact that you are unlikely to be around as long as a non-smoker.
And someone who is more seriously ill could qualify for an ‘impaired annuity', with an even higher rate to reflect the fact that, well, they may possibly leave us relatively soon.
However, don't hold your breath waiting for your pensions provider to alert you to these better rates. Instead, take advice.
An independent financial adviser can look at the whole market, and will be familiar, not only with the right product, but with the best rates on offer today. She or he will make sure that, whether it is life insurance, critical illness insurance, or investing your pension savings, you will get the absolute best deal for you.
And that really should be music to your ears.
Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 7188 6005. For further information go to ‘Kennedy Independent Financial Advice Ltd' on Facebook.