Life insurance versus general insurance

I think you all agree that the mention of the very word ‘insurance’ creates a pretty negative perception in the minds of most of our clients. Some of you will know that this is why I strongly recommend you avoid using the word ‘insurance’ with your clients where possible and replace it with the word ‘protection’ which doesn’t have the same negative connotation.

However, ‘life insurance’ and ‘general insurance’ are descriptions used by our clients to denote different types of personal protection on the one hand (most commonly life insurance and income protection) and car, household contents and buildings insurance on the other. Despite these two different categories of insurance being poles apart, it is not uncommon for people to view them as being part of the same overall basket called ‘insurance’.

We need to make sure we educate our clients as early as possible by drawing some distinct lines in the sand between these two very different types of insurance. I believe that, by drawing our clients’ attention to these points of differentiation, we will also go a long way towards paving the way for a greater understanding and acceptance of the extensive underwriting requirements when applying for life insurance, thereby pre-empting the objections you might otherwise get in this regard.

The main differentiating feature of life insurance over general insurance is the notion of guaranteed insurability or non cancellable cover, a concept that is totally alien to general insurance. With all types of life insurance i.e. income protection, death cover, TPD and trauma cover, once you have been accepted by the life company, the cover is guaranteed renewable on every policy anniversary for the life of the policy irrespective of any changes in your circumstances.

However unhealthy you may become, however many hazardous activities you may take up in the future, whatever occupation you turn your hand to, and wherever in the world you might decide to visit, you will still be covered.

Compare that with all the different types of general insurance. Every time you want to renew your cover on the policy anniversary of your car, household contents or buildings insurance policy, you are reassessed by the insurer and if you are deemed to be a higher risk, your premium will be adjusted accordingly.

No wonder the underwriters of life policies ask so many questions on the way in to the policy, because life underwriters only get one shot with you, whereas general insurance underwriters can move the goalposts every year. Spot the difference!

Based on claims experience, some might also say, in the event of claim, life companies will generally bend over backwards to accommodate a claim, provided it is within the terms and conditions of the policy, whereas general insurance companies will tend to do everything they can to avoid paying a claim provided it is within the terms and conditions of the policy. However, it is dangerous to generalise in this respect as there will always be instances where the opposite may be true.

I believe educating your clients in this way as early in the conversation as possible will help lower the bar when overcoming any resistance to underwriting requirements as well as helping to get possible alternate terms over the line.

Chris Unwin is the founder and chief executive of Chris Unwin Training and Consulting Services