Things change. Families, incomes, debts, health, all are subject to different events each year. This is why it is important to periodically review your insurance covers, to ensure you have the level of protection that you need and avoid paying for excess cover or features that are of little real benefit.
Life events like having a child or increasing your borrowings are often a good trigger for people to review their insurances, but often other changes such as an increase in income, a child starting school, or marriage are important times to be reviewing your cover. A little-known feature of many insurance policies is the ability to increase your sum insured, following certain life events, without medical underwriting. This means if there has been a change in your health status that would ordinarily prevent you from obtaining new cover at standard rates, you may still be able to utilise this feature to increase your insurance. Considering the change in health status this extra cover could be that much more important.
Changes to the Insurance Industry
The insurance industry is also facing changes to both their regulatory requirements and the nature of their medical claims which is why many policy holders have seen increases to the cost of their insurance covers in the last 12 months, particularly for income protection and trauma cover. Until recently there seemed to be a race amongst the major insurers to see who could add the most features to their policies. While these ancillary benefits may sound good in theory (for example, paying a benefit to relocate you back to Australia if injured overseas) the conditions to claim can be quite specific making them less likely to be used and they can add substantially to the overall cost of the cover. Pleasingly some insurers are now recognising not everyone wants or needs every single benefit and are now offering the ability to opt in or out of these features. It is important to work through this with an adviser that understands both the policy and your financial situation so they can tailor the cover to best suit your specific circumstances. In addition, how the policies are owned can make a big difference to the tax implications of both the cost of the cover and any future benefits so it important to get advice on this to make sure you are maximising the tax effectiveness for your individual situation.
As an example, we recently worked with a GP who had substantial covers in place but they hadn’t been reviewed for a number of years. As the cost of that cover had changed significantly since it was originally obtained we were able to restructure the policies using the client’s existing trust structures and super fund to reduce the after tax costs substantially and apply some of those savings to funding new insurances to protect the client’s business if they were unable to work for a period to time. As a result the client is now paying much less in insurance premiums each year with more comprehensive cover in place.
If you would like to review your insurance strategy please let us know and we will arrange a meeting with one of our specialist advisers.