Like other aspects of your financial well-being, you don’t want to take a “set it and forget it” approach to your life insurance policy.
Because life insurance is a safety net for your family and finances, it needs to match your family and financial circumstances to be effective. The amount of cover you need changes over time, depending on your income, your debt level, your lifestyle, and the number of people you’re responsible for. If these factors change, your life insurance should change as well.
As a general rule of thumb, it’s a good idea to review your life insurance with your insurance broker or advisor at least once a year. The life insurance review is a way to make sure that you have the right type and level of coverage to protect your loved ones.
A life insurance review is also the perfect time to learn about any new coverage options your insurer recently announced; to discuss any concerns you have about the rate you’re paying.
The following are five tips to better understand when, what and why should you review your policy as your life changes.
Your Relationship status has changed
If you got married, you’ll want to discuss with your insurance broker the fact that you and your new spouse may now depend on each other’s income and you’re no longer responsible for just yourself. That’s why many people choose to take on life insurance when they get married or buy a house with a partner – it offers assurance that essential costs will be covered should the worst happen.
On the other hand, if you split up with a partner or divorce your spouse, you no longer need to provide for them, then you may find that your coverage or policy beneficiaries need to be adjusted.
Having a baby
Life insurance offers great peace of mind when you have dependants, especially if one partner takes time off work to care for the baby. If you have a baby on the way – whether it’s your first or fifth – it’s a good idea to review your existing insurance if you have it, or buy a policy if you don’t. Make sure your insurance is enough to cover the mortgage and to help the remaining partner pay for ongoing expenses. You could also consider future costs such as private school fees and tertiary education.
Upgrading or downsizing
Did you buy a new house? Congratulations! But now you need to consider the fact that if you were to die unexpectedly, you want your life insurance to cover the remaining mortgage. That’s why it’s particularly important to review your coverage if you buy a property or move house. A bigger house usually means a bigger mortgage and more insurance cover.
On the flip side, if you downsized or paid off your home, you may not need as much life insurance coverage.
Becoming an Empty Nester
As your little babies will grow up and become independent your life insurance needs will decrease. However, some people like to retain parts of a policy so their children and spouse get an inheritance when the insured passes away, this is more of a nice-to-have than an essential depending on your values and beliefs.
Your health has changed
If your health has improved from losing weight, exercising more, getting control of your high cholesterol or you may have given up smoking for at least 12 months since you took out your life insurance policy, check with your insurance broker as your premiums can reduce significantly.
Work With an Insurance broker
One of the best ways to make sure your loved ones are fully protected is to work with a licensed insurance broker who can walk you through the entire process.
If you’re not sure about the appropriate level of cover for your family and financial situation, have a chat with Halo Advisers Limited who are based in Auckland for advice.
Call: 0211835835
Email Us: shak@haloadvisers.co.nz
