The term General Advice means providing information that is factual as compared to full advice which includes recommendations on what type of insurance product to take out as well as a recommendation on the level of cover to be taken.
Full Advice Risk Advisers need to take into consideration your personal situation. This involves the Adviser completing a fact find which outlines your assets, liabilities, income & expenses. The Adviser then provides their recommendation as to which insurance products that you should take out along with the level of cover required. This advice is outlined in a Statement Of Advice (or SOA) The SOA is a lengthy document that the Adviser has to give you by law that outlines their justification of why they have recommended the level of cover and insurance products. This is a costly exercise and there is usually a cost associated with the preparation of an SOA.
A General Advice Risk Adviser (such as myself) can only advise on how a particular insurance policy works and its features and benefits. We cannot recommend that you take out a particular policy, nor can we recommend a certain level of cover. Further to this, we cannot take into consideration anything we know about the client when providing general advice. We do not have to provide an SOA therefore in general; we do not charge our clients a fee or service. We get paid a commission from the insurance company that you take out your policy with.
For example we are aware that the client has a home loan debt of $750,000.00 however the client has asked for Life Insurance of $500,000.00. A General Advice Risk Adviser cannot prompt the client to reconsider their level of cover based on this knowledge.
I often get asked by my clients how much cover to take out or what do my other clients insure themselves for. As described above, I am unable to provide such advice. Further to this, each client has their own personal situation. Theirs will not necessarily reflect yours.
So what should you consider when trying to work out how much cover to take out? Here is a list of things to consider. By all means this list is not exhaustive:-
· Current level of debt
· Plans for future debt (I.E. Purchase of a new car or investment property)
· How much money it will take to educate your current or future children
The Australian Government’s Money Smart website has a very useful tool that assists with working out the level of cover you should consider when insuring yourself. You can access insurance calculator by clicking on the link below:-
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