My bank is forever trying to flog me life insurance be it through online prompts when I access my account online or via unsolicited emails. However, if you were to succumb to these advances and buy life insurance through your bank you will likely pay over the odds for it.
Overcharging
Unwittingly people think that a) their bank has their best interests at heart and b) that they will receive a discount for having their insurance and banking under one roof. The problem is that neither statement is true.
This is highlighted beautifully by the latest claims from the Daily Mail that the nation’s biggest building society, Nationwide, are overcharging customers for basic life insurance by as much as 20%.
Lack of choice
This is because Nationwide sell only Legal & General’s life products in a ‘tied’ relationship. Consequently, when Nationwide savers get a quote for life insurance from their building society they only get access to Legal & General’s products and not the whole of the market. This lack of choice means that there may be cheaper comparable products out there which they are not made aware of. But Legal & General’s products are usually competitively priced. The problem is compounded by the ‘tied’ relationship enabling Nationwide to receive large commissions from Legal & General in exchange for large volumes of business. And ultimately it is Nationwide’s clients who pay for this through higher premiums.
How to get the best deal on life insurance?
Firstly don’t buy life insurance from your bank. Secondly use one of the many online comparison sites such as confused.com to find the best deals out there. If you want advice then speak to an independent financial adviser or life insurance broker who are not tied in anyway.
The good news is that there are changes afoot in the finance industry to limit this kind of profiteering but they are still some way off. So until then make sure you know who is getting paid what when you take out any kind of financial product – as ultimately it’s you who lines these companies pockets.
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