Most people who read this have at some point in their life have taken out either a life insurance, mortgage protection or Serious Illness policy.
For the vast majority of people, they just set up the Direct Debit, put the policy documents in a drawer and never look at it again thinking ‘job done’. This shouldn’t be the case however, you should review these policies every few years just as you would with your car or home insurance, after all you wouldn’t keep paying the same rate of car insurance if you changed your car would you. It is also very important to know what level of cover is available through your work Death in Service benefits. Not every workplace offers this but for those that do it is important that you are aware of the details as it can impact the overall level of cover you need.
There are numerous reasons why your existing cover may no longer be appropriate for you. Below is just a selection of some of the reasons why you might need to review your cover more regularly:
Marital Status Changed? : Have you married since taking out your original policy? Are you single now through death or separation? you may need to review your life insurance. Do you still need cover, are your children no longer dependent on your income? If so then it might be appropriate to cancel your cover.
However if you are now a lone parent with dependent children then you may have to increase your cover.
As the sole earner your children are 100% reliant on you. What would happen if your income stopped? You need to look at life insurance and income protection.
Children: Expecting a baby? Do you now have more children than when you took out your original cover? You need to make sure your children are financially cared for if something is to happen you or your partner. While a mortgage protection policy will clear your mortgage, it will not leave a cash lump sum to pay for the day to day needs of your child. This is what life insurance is for.
Buying a Home OR moving Homes: You must take out a mortgage protection policy when you buy a family home. We would always advise putting a separate life insurance policy in place too to protect your family. Mortgage protection will take care of the house; life insurance will take care of the people you love in it.
Changed Jobs: Do you have a new job? An increased income? As your income has risen, you may need to increase your life cover too. Remember life insurance is there to replace your income lost on death. If there is more income to replace, then you need more life insurance.
On the other hand if you have experienced a drop in income, then maybe you can save money by reducing your cover. Always check what benefits are available through your workplace as this will form part of your overall cover.
Given up Smoking: If you were priced as a smoker when you commenced a plan but have since given them up (and have been off them for at least 12 months) this can be one of the biggest factors in calculating your premium. In some cases, premiums can reduce by up to 50%, if this is the case, it is well worth getting up to date quotes.
A recent survey by the Life Assurance Company, Royal London found that you could pay as much as 21% more for Life Cover depending on where you have sourced it. Significant savings can be made by shopping around. Other factors such as the Gender Directive in December 2012 or simply the competition between life companies, could mean that it is possible for you to reduce your monthly premium without compromising on the quality of cover.
It is one of the easiest things to do as you can get quotes to compare with your existing policies, thus enabling a decision on whether or not it makes sense to retain the existing one or change. Doing this review can also prompt you to review other areas of your finances and to possibly make improvements there also.
It’s always a worthwhile phone call to your advisor to start the review process.
Conor Harte BFS QFA CFP® is a Financial Planner with Wealthwise Financial Planning who are based in Block C, Hartley Business Park , Carrick on Shannon, www.wealthwise.ie All details and views contained within this article are for informational purposes only and does not constitute advice. Wealthwise Financial Planning makes no representations as to the accuracy, completeness or suitability of any information and will not be liable for any errors, omissions or any losses arising from its use. Wealthwise Financial Ltd T/A Wealthwise Financial Planning is Regulated by the central Bank of Ireland.#CI66141