Don’t believe a word insurance companies say

do the mathInsurance companies are not benign entities ready to sign off a big, fat cheque when life’s worst happens.

They are multinational conglomerates designed as money machines to print off cash for the shareholders from the profits they make. Their marketing is often based on guilt.

Two new adverts are due to hit the TV from insurer Zurich – one is about a guy who loses his treasured bicycle and the other about a young couple walking hand in hand.

They tug at the heartstrings and are aimed at provoking guilt. The tagline for the ads is “For those that truly love”.

What the message really means is if you really love your partner and children or value your possessions, then you would buy insurance cover for them, whatever the cost.

Another target market for insurers is the over 50s who are worried that their families may have to pay inheritance tax and bear the cost of their funerals.

Some specialist firms offer life insurance without a medical, no questions asked for this cover – and throw in a free pen or alarm clock.

But a comparison by consumer group Which? revealed that these firms fronted by aging TV stars charge up to three times more for the same cover as other insurance firms just because they change the label to ‘funeral plans’.

The study showed £20 a month on an Axa Sun Life plan would buy around £6,500 of cover for a fit and healthy 50 year old man – while the same amount could provide more than £20,000 of cover from another insurer.

Rather than buy an insurance plan for the over 50s, the consumer group suggested putting the same money away in an ISA each month would build a cash nest-egg of considerably more than the policy would pay out .

If someone started a policy at £20 a month at 50, to break even on a £6,500 return, they would have to live to 77 years old. Living longer would show a decreasing return on the policy because every £20 in goes to the insurer without any return to the policyholder.

The lessons are do the math independently of the insurer before committing any cash and don’t fall for sob stories designed to play on your guilt

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