What am I really paying, and what does the advisor earn?
“They only want my money.” What you are entitled to know about the intermediary’s pay, which costs sit inside a policy, and how to compare quotes without looking only at the monthly figure.
In short
Before the contract, the intermediary must tell you what kind of pay they receive; the law requires the type, not necessarily the amount. And that pay must not conflict with your best interests.
- Ask in writing: how are you paid, and are you tied to particular insurers?
- For an investment product, ask for the total cost information and the Key Information Document.
- Put two offers side by side: amount, term, exclusions, increases and total cost, not only the monthly figure.
At a glance
- Before the contract, the intermediary must tell you what kind of pay they receive: a fee from you, a commission included in the premium, another benefit, or a combination.
- The law requires the type of pay to be disclosed, not necessarily the amount. For investment products, the total costs appear in the cost information.
- Pay and sales targets must not conflict with your best interests.
- Compare the total cost over the whole term and what each one covers, not only the monthly figure.
Suspicion is your right
When someone proposes a policy and is paid from it, it is reasonable to wonder whom they work for. You do not need to guess: the law gives you the right to know how they are paid, and requires them to act in your best interests. AVRASTRO does not sell insurance; here we explain what you are entitled to ask.
What the intermediary must tell you
- What kind of pay they receive: a fee you pay, a commission included in the premium, another benefit, or a combination.
- Whether they hold 10% or more in an insurer (or the other way round).
- Whether their advice is based on a fair and personal analysis of the market.
- Whether they are contractually tied to specific insurers.
The law requires the type of pay to be disclosed, not necessarily the amount. For insurance-based investment products, though, the costs and charges, including any payments to third parties, must be given to you in total before the contract, so you can see their effect on returns. And in every case the distributor must act honestly, fairly and professionally in your best interests; pay and sales targets must not push them towards one product when another would suit you better.
How to compare two quotes
Two quotes with the same monthly figure can cover very different things. Compare: the amount of cover and the term, what is covered and what is excluded, whether the premium stays level or rises, the total costs for investment products, and the total amount you will pay over the whole term.
Your questions, one by one
Real people ask these questions, sometimes in anger. We answer them as they are, briefly and calmly.
They only want my money.
The distrust is understandable, and a good intermediary will not ask you to drop it. The law requires them to act in your best interests, tell you how they are paid and propose what fits your needs. Ask for these in writing, and if you do not get them, go elsewhere.
How much commission does the advisor earn from my policy?
The law requires them to tell you what kind of pay they receive, not necessarily the amount. For investment products, the total costs, including payments to third parties, appear in the cost information. You can always ask for the amount too; if they will not say, that is information as well.
Am I entitled to know how my advisor is paid?
Yes. Before the contract, the intermediary must tell you whether they receive a fee from you, a commission in the premium, another benefit or a combination, and whether they are tied to specific insurers.
What are all the charges in a savings policy — allocation, policy fee, fund management?
Usually: premium allocation charges, a policy fee, the fund management charge, the cost of the insurance covers and perhaps surrender charges. They must be given to you in total before the contract, and itemised if you ask.
Insurance is too expensive for ordinary families.
For many families the premium is a real burden, and that is no weakness. Often simple term life cover costs less than people imagine, and the amount can be adjusted to the budget. Start from what your family needs, not from a ready-made package.
How much does basic life cover actually cost per month?
We do not give prices: the premium depends on age, health, smoking, the amount, the term and the insurer. Ask for written quotes for the same amount and term. Our tool helps you first work out how much cover you need.
Why do two quotes for the same cover differ so much?
Because it is rarely exactly the same cover: definitions, exclusions, whether the premium stays level, extra covers and the way each insurer assesses risk all differ. Put the quotes side by side, line by line.
Is there a policy fee on top of the premium?
There may be, depending on the policy. Ask in writing for a breakdown of what you pay: premium, fees, any extra covers.
Do I pay more if I pay monthly instead of yearly?
Monthly payment often costs a little more in total than yearly, but not always. Ask for the quote both ways and compare the yearly total.
Most of my first-year payments went to commission, didn’t they?
In many savings policies charges are higher in the first years, and they include distribution costs. Exactly how much went where is shown in the cost information and the annual statement. Ask for a written breakdown if it is not clear.
What does ‘Reduction in Yield’ mean in the KID?
It shows how much the costs reduce your yearly return, so you can compare products. Newer documents show it as the impact of costs on return. The bigger the number, the more the costs eat away.
Does buying through an advisor cost more than buying direct?
Not necessarily. Often the premium is the same and the intermediary’s pay is already included in it. Ask both channels and compare the same cover, and think about what help with a claim is worth.
Can I negotiate the premium?
The premium comes from the insurer’s tariff based on risk, so it is usually not negotiated like a market price. You can, however, change the amount, the term, the extra covers or the excess, and compare insurers.
Why does my premium include costs I never agreed to?
All costs should be visible in the documents before you sign. Ask in writing for a breakdown and the term each charge relies on. If you believe something was not disclosed, make a written complaint.
What is a fair price for peace of mind?
There is no single number. A sensible starting point is what your family would need if you were gone, and then what fits comfortably in your budget without sacrificing your emergency fund.
Does a higher premium mean better cover?
Not always. A higher premium may mean more cover, but also higher costs or covers you do not need. Compare exactly what is covered.
How do I compare total cost over 20 years, not just monthly price?
Multiply the premium by the years of payment, allow for whether it rises each year (for example with indexation or age), and for investment products look at the impact of costs in the Key Information Document.
Do smokers really pay double?
Smokers usually pay more for life cover, because the risk is higher. How much more depends on the insurer and age; we will not give you a figure that may not apply. Declare smoking honestly.
Advisors push the products with the highest commission.
The law forbids pay and sales targets from pushing a distributor towards one product when another would suit you better. Ask them to explain in writing why the proposal fits your needs. If the explanation does not convince you, get a second opinion.
Is the commission paid once or every year?
It differs from product to product and insurer to insurer: it may be at the start, every year, or a combination. Ask the intermediary; they must tell you the type of their pay.
Are there ways to keep good cover but pay less?
Often yes: drop extra covers you do not need, match the term to your obligations, choose an excess on a health plan, or compare quotes for the same cover. Before changing anything, ask what you would lose.
What you can do from today
- Ask your intermediary in writing: how are you paid, and are you tied to specific insurers?
- For an investment product, ask for the total cost information and the Key Information Document.
- Put two quotes side by side: amount, term, exclusions, increases, total cost.
- Remove what you do not need, after asking what you would lose.
Sources
Every policy has its own terms. What we write here is general information, not advice; for your own case, what your policy says applies, and it is worth confirming it in writing with your insurer.
Read also: How to check an advisor and where to complain · Investment funds in plain words · How to read the annual statement · All the questions you are afraid to ask
