The Life Insurance Premium Trap

Which nearly everyone who takes out a life insurance policy falls into.

If you located this website to seek a solution to premiums on insurance cover you already have which have become increasingly expensive - maybe you already have.

Meet Clever Cloggs

Clever's one of those people who always seems to know more about anything than you do. You might actually have met him. Clever 'shops around' for everything and, when Clever recognised the financial security of his family could benefit from the sort of protection that can only be provided by insurance products, he went off to 'shop-around'.

To his credit, Clever researched the types of cover available in and it all became very confusing. Even his bank and his accountant offered to arrange his insurance for him. He also found plenty of internet websites who guaranteed to get him the 'lowest' premiums for his cover. He was impressed that they could 'compare' costs from lots of insurers, some he'd never even heard of. Ultimately Clever found the lowest premiums and he arranged all his Insurance for himself and his wife.

Clever was delighted with the job he’d done for himself and would regularly tell anyone he could find who'd listen how his cover was the lowest cost - and sometimes he even suggested to his friends that they might like to do the same.
But, as time went on, Clever found that the cost of his cover was increasing every year and was actually becoming quite expensive.

He phoned the insurer to find out why it kept costing more every year - in fact it was now costing twice as much as it did originally - even though his cover hadn’t increased - and was told that’s just the way it is and there was nothing he could do about it.

In fact, after some more research Clever found out that the premiums would soon be twice as much as he was paying right then and this was already becoming a financial nightmare. Funny - he didn’t recall them telling him that when he first took his cover.

At one stage he 'shopped around' again to see if he could 'do better' on his life insurance premiums but found that all insurers were charging around the same premium for a person of his age and it wasn't worth switching. And that wasn’t all ...

His children were growing up and had become bottomless money-pits and after paying his everyday bills and mortgage and car and credit cards - it became obvious to Clever that some ‘cuts’ had to be made.

What Clever didn’t realise at the time was that he’d fallen into the 'Life Insurance Premium Trap' – but he was soon to find out … in the most tragic of ways.

Meet Blind Freddie

Blind is your Mr. Average. Blind’s happy to do his job every day and look after his family and home the best he can. Like Clever Cloggs, he doesn’t have much spare money around and has to ensure he gets value for any money he spends. Blind knows can’t know everything about everything, like Clever seems to, and is happy to consider taking advice from people who do what they do - just like doctors, accountants, pharmacists and so on.

One day Blind, recognised the financial security of his family could benefit from the sort of protection that can only be provided by insurance products and he thought it better to talk to a broker. After all, the reason he's taking the cover is to protect his family financially if something happened to him. And Blind reckons this is something to be done properly.

Luckily Blind contacted us. When we illustrated the long-term benefit of the cover we suggested – and illustrated to him how he could save so much money over the long-term he was so impressed both he and Mrs. Freddie completed the applications they received and mailed them back to us. All their cover was accepted by the major Australian insurer we selected and they received their policy documents back in the mail.

Some time later, Blind phoned us as he had become concerned, after talking to his mate, Clever Cloggs, at a barbecue, that he seemed to be paying a higher premium than Clever was for about the same cover. We reminded him that while he was paying a bit more up front over the long term he would benefit from this as his premiums wouldn’t increase like Clever’s were. Blind was reassured about how his cover was looking after him and his family over the long term, which is why he arranged it, and slept soundly that night – in fact he slept soundly every night.

It turns out that some time later, at another barbecue, Clever confessed that he was finding it a bit difficult to pay his insurance premiums at all because they kept increasing as he got older. Blind mentioned that he wasn't finding it a problem as his premiums hadn't increased since he originally arranged his cover and in fact it was actually easier to pay them now than when he first arranged his cover.

Apparently, Clever had admitted at the time that he wondered why no-one had told him about premium increases when he first took out his ‘cheap’ cover.

Some years later …

Clever suffered a massive stroke – from which he ultimately never recovered. His income immediately stopped and his wife was forced to make some serious cut-backs in expenses.

One of the major costs at that time was the Life Insurance policy. Even before Clever's illness, when he was able to work, there had been no possibility of being able to keep it going  as it had become so expensive.

By the time Clever passed away – the Clogg’s financial status was bordering on destitution. All their savings had been spent on medical expenses during Clever's illness, and the bit of money left over from the 'fire' sale of the house mostly went to pay for the funeral.

No-one’s seen or knows what happened to the Cloggs family since they were forced to sell up and move out of their family home.

One day, Blind Freddie was diagnosed with cancer.

His income also diminished during his treatment – but the premiums for his Life Insurance cover had, by this time, become relatively insignificant and it was easy to keep it going.

Sadly, Blind’s condition deteriorated to such an extent that his doctors decided that Blind was unlikely to survive for 12 months.

Blind contacted us about this as he was ‘getting his affairs in order’.

We reminded him that he had a ‘terminal illness’ benefit on his Life Insurance policy - which was designed to make the payment of the insured amount in situations just like the one he now found himself in.

We arranged for claim forms to be provided and assisted with their processing.

Shortly after, the Freddie’s received their payment from the insurer and they were able, pay off all their debts with have enough left over for the family to live securely.

Blind passed away shortly after - but at least with the satisfaction that his family was going to be financially secure - which was why he'd taken out his policy in the first place.

Compare Clever's and Blind's premiums

Premiums shown below are typical and taken from a major Australian insurer’s rate system. They are for $500,000 Life Insurance cover for a male non-smoker. (A non-smoker is someone who hasn’t smoked anything for at least 12 months.)

For simplicity, 5 yearly intervals are shown but premiums for Clever’s cover increase every year.

You don’t have to be Blind Freddie to see which option can suit you the best.