Insurance refresher: When do you need to update your policies? (and when to get one)
One of the best things about life is that it's always changing. You might buy a new car, get married, or have children. As your life changes, so do your personal insurance needs. That's why it's important to check your personal insurance policies every few years to make sure they still reflect your current situation. Otherwise, you could be paying for more coverage than you need—or worse, not enough. By keeping your insurance up to date, you can be sure that you and your loved ones are taken care of no matter what life throws your way. Let's walk through the basics of updates and when it's time to take action.
The different types of personal insurance available
Personal insurance policies are not just a one size fits all kind of deal, they are just that, personal. Your financial adviser should be able to chat with you and get to know how you live now as well as what your future dreams are. With that information, they can recommend insurance policies tailored specifically for you and your unique circumstances that will protect those dreams no matter what comes up.
Head over to this page to know a bit more about the four main life insurance options but the TLDR version of the four types are: life insurance, total permanent disability, income protection, and trauma cover. These can stand alone or be combined for a more comprehensive cover.
How often should you review your insurance cover?
As a general rule of thumb, it's good to give your policies a once-over every year to make sure you understand the premiums and the level of cover you have. That way, you can make sure everything is still accurate and adequate for your current situation.
And hey, if nothing has changed in the last years? Good for you! But keep in mind if you’ve had any major changes to your situation then give your adviser a call (or text if you're under 30) to ask if anything needs changing.
If you do need to increase the cover, then be aware it's going to take time. Much like debt, if you want to reduce your debt the banks won't ask any questions, however, if you wanted to add an extra $1 to your home loan, you’ll need to do a full application.
Personal insurance is different to most other insurance policies as even a minor increase in cover will require a full new application with the insurer as they’ll want to make sure you haven’t had any major health events since the original application.
What life events warrant an update to your personal insurance policy?
Some changes in your life will mean that you should adjust your insurance policy. Here are some examples:
Buying a new home (or downsizing)
Buying (or selling) is stressful enough, with having to organise finance, manage the settlement date, coordinate moving as well as setting up all your utilities for the new house. Well, guess what, we just added something else to the list of things to consider. Most people forget to do this, and it can lead to gaps on cover or higher premiums than required. People move for different reasons: some buy their first home, others need more space due to a growing family, and still, others want to downsize because they have fewer dependents or are on a tighter budget. If any of these scenarios happen, you should consider reviewing your personal insurances to make sure you have the right cover in place.
Changes in your family structure (new baby, marriage, death, divorce)
Oh, hey! You got married! Or had a baby! (Or both!) Congratulations! Now it's time to update your cover as well as update your beneficiaries. If you have a new spouse or child, you'll want to add them to your personal insurance policy so they can receive the death benefit if something happens to you. You should also update your beneficiaries if there are any changes in your family structure, like a divorce. That way, you can be sure that your life insurance money goes to the people who need it most.
In addition, if you’ve just had a new addition to the family and there is more to consider than just you and a partner, then this is a great time to make sure you have life insurance as it's not so easy returning to work immediately after the loss of a spouse—you now have someone relying on your income.
Changing jobs or financial situation
This one is pretty self-explanatory—if your income or assets have significantly increased or decreased, it's time to update your insurance policy. This is particularly important for high-income earners who may need more cover to make sure their loved ones are taken care of after they're gone. Or in other cases, if you come into a large sum of money and therefore no longer require as much cover.
So here's to taking charge of your life! You might be doing well in your current job or looking for new employment. But don't let changes in your finances catch you by surprise—make sure everything is accounted for. Always check with your adviser when major life changes occur to ensure you have the right cover in place. And while we know updating insurance policies isn't the most exciting task on your to-do list, trust us, it's worth taking care of.
Strapped for cash
Uh-oh, life got expensive! You might need to adjust the cover of your insurance policy if your family's needs have changed. For example, you might need to increase your cover if you have more debts or dependents. On the other hand, you might be struggling with the increasing cost of living and want to consider your options to reduce the premiums.
The good thing about insurance is that it's not a matter of all or nothing, if the premiums are starting to creep up over time, this is a great reason to reach out to your adviser to talk about ways to reduce the cost by: Decreasing the level of cover, increasing the waiting period on income protection, removing some additional features or benefits or even considering placing the policies to be paid from your super fund.
By keeping insurance policy up to date, you can be sure that your loved ones will be taken care of financially whatever comes your way while still being able to manage the premiums.
Drink to your health
Raise your hand if you've ever been proactive with your health and went to a physio or got a mental health care plan. Yeah, we've all been there. But here's the thing: If you set up your policy soon after your proactive treatment, your insurance company would have likely placed an exclusion or loading on the policy (like 74% of our clients in 2021-2022). The good news is that if it's been sometime since you set up the policy and you haven’t had any treatment or symptoms for a number of years, you may be able to speak with your financial adviser to help you remove these exclusions!
If you’re unsure then just reach out to your adviser to ask them if there are any exclusions and if so will the insurer potentially review them and in what timeframe.
How to change your personal insurance policies
Decrease in cover
Very easy and you can request this directly with the insurer or through your adviser (they may provide additional advice if you want to look at different options)
Increase in cover options
Full application - Underwriting and often with paper forms
Future increase options (retail only) - Limited to no underwriting
What happens if you don’t have any insurance?
One mistake people make is not getting personal insurance in place until it's too late. Generally speaking, if you rely on your income to survive then income protection is a must and more so if you have dependents who rely on you being around, it's a must.
But don't wait until you have a health scare or major life event to get covered—the premiums for life insurance can be limited with exclusions or more expensive if you already have pre-existing conditions. Don't let updating your policies fall to the bottom of your to-do list. Take some time today to review and make sure you're fully covered.
One quick check & you're good to go
I bet you're thinking, "This is a lot of information. I'm not sure I can keep track of it all." And you know what? That's totally normal and it's okay to need some help. It’s probably a good time to approach a financial adviser who has years’ worth (literally) experience helping people just like yourself figure this stuff out. They'll be upfront about what options are right and wrong for you—plus they won't beat around the bush when giving advice on how to protect yourself or loved ones should anything happen. And if you don’t know where to start, book in a call with us and we’ll help you figure it out. (wink)
Hey, guess what? We hosted a webinar called "Insurance Refresher: When do you need to update your policies? (And when to get one)" with Phil and Glen, from My Millennial Money, sharing their expertise. If you're looking to dive deeper and gain some valuable insights, you can catch the webinar video right here: Watch Webinar