The cost of NOT reviewing your insurance

15 January 2016
When we ask clients what personal (life, income protection, health, trauma etc) insurance they have they almost always cannot accurately identify what type of cover they have and at what level.  If clients don’t know what they have, they how can they be assured they have the right type and level of cover for their current situation.  This is one of the main reasons why we always recommend annual insurance reviews plus reviews when financial situations change markedly.  Yet most people do not take up the opportunity to review their insurance.  This article addresses some issues that have resulted in clients NOT reviewing their insurance.
INCOME PROTECTION – We arranged income protection cover for a client 5 years ago.  Every time we did a loan alteration we suggested an insurance.  She never took that offer up.  She had an illness recently which meant that she had to go on claim for her income protection only to find that her expectations were not met.  Her income had increased during this time as had her debts so the level that was paid out insufficient for those needs.  
LOADINGS – A client had a loading of 200% for a high Body Mass Index (ie because he was overweight he was paying 3 times more on his insurance premiums).  He had this loading for the previous 10 years.  However he had lost weight 2 years after his policy was issued.  If he had an annual review this would have been picked up and his premiums would have been lowered 8 years previously.
COST DIFFERENCE BETWEEN AGENCIES – A client had not had a review since her cover was originally put in place.  While the type and level of cover was still recommended the agency that she was with now had premiums that were far more expensive than 2 other agencies who were offering the exact same type of cover.  Changing earlier would have saved her in premiums.
PRODUCT DIFFERENCE BETWEEN AGENCIES – For the same cost we could change a few of our clients to get better cover ie a better type of insurance cover.  One that included Total Permanent Disability cover on their trauma for no extra cost – in some instances it was actually cheaper than what they were paying.  So for a lower cost the client got a lot better cover.  
LEVEL OF COVER – one client had paid off his mortgage and his 2 children had left home.  This meant that his cover (and his premiums) were higher than it needed to be.  It did of course mean that if something happened he would be paid out a higher level than what his situation “needed” but it also meant he had been paying premiums on cover that he really didn’t need.
If clients do not review their situation they can’t take advantage of the opportunities that have arisen since their cover was originally put in place.  It could also mean that any changes may mean that they have inadequate cover and that if a claim was made then their expectations would not be meant.  You need to review your insurance cover at least on an annual basis and if there are any major changes in your financial situation.  And the review needs to be done with an advisor who is able to adequately identify your needs and offer solutions that best suit to accommodate those needs.   

Published In Whakatane Beacon

This post was written by

Trish Marsden - who has written 96 posts

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