Why it pays to review your cover
Your life insurance is flexible and can be adapted to your changing needs.
Make sure you have a cover review with your adviser every 12-18 months to ensure you’re covered for just the right amount, paying the right amount, and getting the best value from your policy.
Every 12-18 months, make sure you ask yourself, have you:
- Welcomed any new members to the family or taken on new responsibilities such as caring for an older relative?
You might want to add a new beneficiary to your policy or increase your amount insured to cover for your growing family’s future needs and the increased financial responsibility you have.
- Changed jobs or got a promotion?
Your income is your biggest asset over the course of your life. If your income has changed, your future needs have likely changed too – so you’d benefit from reviewing your sum insured with your financial adviser.
This is especially important if you’ve got income protection. That’s because your benefit amount, and the premium you’re paying, are directly linked to the personal income we have recorded on your policy.
- Paid off large debts?
The amount you’re insured for is to cover for your future financial needs should something happen to you. If you’ve significantly paid down large debts, your needs may have changed.
You may want to think about reviewing your sum insured to ensure it’s right for your needs – not too little, and also not too much.
- Taken on any new debts?
Being insured for the right amount is an important factor of cover suitability. Customers usually need a level of cover that can, as a minimum, pay off any existing debts should something happen to them. If you’ve taken on new debts, your needs may have changed.
- Does your policy have a health loading? Has your health improved – or have you stopped smoking?
Personal risk factors such as smoking and your Body Mass Index (BMI) add what are called ‘premium loadings’ to your cover – which means you pay a higher premium than someone who doesn’t have this risk factor.
If your health has improved (e.g. you’ve lowered your BMI or your lifestyle has changed recently), get in touch with your financial adviser to review your policy and determine if these loadings can be removed to help lower your premium.
Ways you can adapt your cover to your current needs:
1) Choose the amount you’re insured for
Your premium is closely linked to the total amount you’re insured for. And it’s important to make sure you’re covered for the right amount – not too little, not too much.
2) Choose to pay stepped or level premiums
Most insurers offer two ways to structure your premiums:
- Stepped premiums are recalculated each year based on your age at renewal – they start lower and increase as you get older.
- Level premiums are ‘averaged out’ across the duration of your cover, which means they start higher in the early years but end up being cheaper in the later years.
Choosing the premium type that’s right for you can have a big impact on the lifetime cost of your policy, and your financial adviser will be able to help with forecasting that impact.
3) Choose to accept or decline indexation
Indexation is an automatic increase to your sum insured to ensure the value of your policy is not eroded by the impacts of inflation.
But you’re in control – it’s important to know that as the sum insured increases, the premium you pay may also increase. This means there are circumstances in which you might want to decline the indexation offer.
4) Remove any loadings you might have
Personal risk factors such as smoking, dangerous hobbies or occupations, or a high Body Mass Index (BMI) may add what’s called a ‘premium loading’ to your cover – which means you pay a higher premium than someone who doesn’t have those risk factors.
Any loadings like these are recorded on your Policy Schedule. So, if your health improves or your lifestyle has changed recently, get in touch with your financial adviser to review your policy and determine if these loadings can be removed to help lower your premium.
Want to know more?
If you’d like to discuss any of the content in this article and how it may apply to you, please call me on 02 49332364.
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