Insurance Updates

Direct Insurance

Direct insurance has taken the insurance industry by tempest in recent years. fundamentally it refers to the taking out of insurance by a client in a straight line with the insurance company, rather than going via an intermediary such as an insurance agent. Of course this has cause quite a lot of dismay in certain sectors of the insurance industry, not least among brokers themselves. It has however gained much attractiveness among clients, as it is perceived to be a more cost effective and efficient way of dealing with insurance needs.

The idea for direct insurance came out of a gap recognized as developing in the industry as a result of it becoming overly bloated with intermediaries. While it can be, and indeed has been and still is, strongly argued that insurance brokers serve a valuable purpose of guiding clients through what can be an threatening process of thoughtful how insurance policies work, how to go about sourcing them, and how to identify the most beneficial ways to take out insurance, this all has to be paid for, usually in the form of commissions to the brokers - which obviously are funded by slightly increased premiums. Thus the idea was born, that if the brokers are bypassed, insuring oneself should become cheaper.

What has also help to increase the direct insurance angle is that insurance companies have become more willing to make insurance simpler and more transparent - largely due to government pressure and concomitant changes in legislation, it has to be said. This has meant that the average person in the street can now decipher an insurance policy in a important way, and has become less frightened by dealing with insurance as a whole. This has significantly helped to remove the need to rely on an expert consultant such as an insurance agent.

Taking advantage of this, direct insurance companies have sprung up like mushroom on a moonless night. One of the first and most successful in South Africa is Dial Direct. There is also the well-known OUTsurance. These and other direct insurers work via sophisticated call centres, allowing prospective clients to simply call up, choose their insurance options and conclude their insurance agreements over the phone. This is fast and efficient, and has proved to be a highly successful business model. The Internet has obviously also played a role, with online insurance shopping also contributory to the boom in direct insurance.

What type of life insurance is best?

Before you can shop for life insurance, you should know the main types of policies that exist and how they're used. Policies come in many flavor. Here's a basic coverage of the four main categories.

    * Term life insurance is often careful the least complicated, cheapest and most recommended type of life insurance to buy. Term policies cover the insured for a specific term, or time period.

If the insured dies before the term ends, his or her beneficiaries generally receive a lump-sum payment. If the insured outlives the term of the policy, it simply expires. By that time, if the policyholder has built up a substantial savings or he or she no longer has dependents, he or she may not need life insurance.

    * Whole life insurance policies are more expensive than term policies. They provide coverage for the insured's entire life and will not expire as long as he or she keeps paying the premium.

    * Universal life insurance is similar to a whole life policy, but cash is set aside for investment, with the goal of earning more money for the consumer. The face value of the policy can increase or decrease with the value of the investment. Upon the insured's death, the beneficiaries may receive the face value of the policy or the face value plus the cash value of the investment account.

    * Variable life insurance is similar to universal life, but it generally has more investment options, such as stocks, bonds and mutual funds. The policyholder can characteristically choose the investment vehicle they want to use.

Finding a life insurance policy does not need to be confusing. When armed with the right information, consumers can make the best policy decisions for their families and beneficiaries.