It’s only normal to be overwhelmed by the process of taking out life insurance. Assessing how much cover you need, comparing the different policy options available and finally submitting the application can be time consuming and confusing if the proper assistance is not given. The last thing policyholders should do after all that work is to let their policy sit there and continue to make premium payments without regularly reviewing their policy.
Making regular reviews over the term of the policy is a crucial component of having protective cover in place. Doing so can ensure you are not over-insured and paying too much and are not exposed to new risks that have surfaced since your policy commenced. Let’s take a look at some key steps to take when reviewing your cover.
Change in financial obligations
Increase of cover
An accumulation of more debt, home upgrade and the arrival of new children can be key reasons to reconsider the level of cover provided in your current situation. Many policies will allow policyholders to apply for more cover without undergoing more rounds of medical testing under the Guaranteed Insurability Feature.
Decrease of cover
You may feel as though you are able to reduce the sum insured in later years as you have less financial obligations or less debt. There are some key things to watch out for if looking to reduce your cover:
- Have any new medical conditions developed since you last reviewed your policy? It could be worth taking a medical examination to ensure there is sufficient cover in place to account for these.
- Most insurance policies are indexed to increase with annual rises in inflation. It’s important to determine if reducing your sum insured will still enable you to remain in line with the Consumer Price Index in the future.
Review of policy options
You may find that the benefits and features offered in your current policy do not provide an adequate level of protection to cover changes to your health, employment or family life. Alternatively, you may feel that some additional benefits are no longer needed and can be trimmed back to save on premiums. If so, you may want to contact your current provider to enquire about an adjustment to your current policy or to hunt out a new policy altogether.
Changes to health
If you had a premium loading applied to your policy at the time of application that is no longer relevant, you may be able to have this reviewed and your premium adjusted. As an example, policyholders that have quit smoking for 12 months or more can have their premiums adjusted to reflect non-smoker status.
Updating policy beneficiaries
Assessing your policy’s nominated beneficiaries is a crucial step in the policy review. Some key events that may prompt an update to your beneficiaries include;
- Reduction or removal of financial dependency from a beneficiary
- Death of a beneficiary
- Arrival of a new child. Either through birth or remarriage
- Divorce or separation
Policyholders can update their beneficiaries by contacting their insurance provider and requesting the necessary documentation for policy adjustments.
Life cover in superannuation
It’s quite normal for people to have multiple superannuation funds from different employers. It’s worth checking if any default life cover has accumulated in these different funds. Consolidation of cover into one fund can be more efficient to manage and cut out individual charges.
If you’re unsure about what is covered by life insurance through your superannuation fund, read our article, ‘Superannuation and life insurance‘.
Care is needed when reviewing
The decision to review your policy should not stem solely from the desire to keep some extra cash in your pocket each month. It’s vital that policyholders take the time to make an accurate assessment of how their situation has changed and how it will continue to change in the future. This process can be made easier through the help of budgeting spreadsheets and online assessment calculator tools. An insurance consultant can provide great assistance in helping you determine an appropriate level of cover and help you compare different options if you are ready to transfer to a new policy.