Financial Planning is as much about protecting your financial assets as it is accumulating them.
It is not only the establishment but also the review of personal insurances is an important part of financial plan.
In their report Rice Warner (1) found that even though the take up of personal insurances is strong in the Australian population, the levels of insurance in the majority is inadequate.
Through superannuation, many have some them of insurance. However, there still remains a level of underinsurance as people do not: 1. Know the levels of insurance that they require and 2. Don’t know the levels of insurance they hold.
At the least you should review your insurances every 12-18 months. Your life insurance is flexible and can be adapted to your changing needs.
Reviewing it with an adviser will ensure you’re covered for just the right amount, paying the right amount, and getting the best value from your policy.
On review 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.
Want to know more?
Insurance is not a ‘set and forget’ product. Many parts of it need to be reviewed to make sure not only you have the right level of cover but also that you aren’t paying for something you no longer need.
Schedule a no-obligation Discovery Chat with us – We’ll help your review your current situation, your cover and identify any gaps.
Discovery Wealth – The Hills trusted name in financial advice.
- Rice Warner (February 2018) Life insurance adequacy [online] Available at: https://www.ricewarner.com/life-insurance-adequacy/
The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. Louella Jorge is an Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429. This editorial does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information, you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser before you act.