Fali Mistry –
While the importance of insurance in an uncertain world cannot be overemphasised, it is equally important to review the insurance policy to ensure that it remains relevant and is attuned to the changing circumstances and conditions.
Unless reviewed periodically with the help of an authorised or licensed insurance adviser, an insurance policy may not accrue its full value.
Changing circumstances
Here are a few examples:
A person may have purchased an investment property and his/her mortgage may have gone up. Such increases must be matched by increased Life Cover to ensure appropriate benefit to the assigned in the event of the death of the policyholder.
A person’s income may have increased substantially over a period and if that person’s insurance policy has not been updated, he or she may face financial hardships or constrained to downgrade lifestyle in the event of a disability. It is very important for people of high income to update their insurance cover regularly.
Loan repayment
An individual may have bought his or her first home but may not have availed of Mortgage Repayment Cover to protect repayments. This person stands the risk of huge financial loss in the event of disability or redundancy. There have been cases of uninsured and underinsured people forced to sell their house, unable to meet their mortgage repayments.
The fine print
The most important factor is that with passage of time, most insurance companies update their products and policy wordings. If you have not reviewed and updated your insurance policy, you and/or your beneficiaries may lose on a potential claim due to outdated policy wordings.
How frequent should insurance policies be reviewed?
There is no fixed answer to this question. However, polices can be reviewed any time or at any of the following circumstances, which insurance companies call ‘A Special Event.’
Special events
They are marriage or civil union; divorce or legal separation; a dependent relative becoming employed; birth or adoption of a child; taking up or increasing a mortgage; a dependent child starting full time tertiary study; and increase in annual salary.
Even if you have not experienced any of the above, it is advisable to review your insurance policy regularly.
It is important to take out an insurance policy and have it reviewed regularly through an officially recognised financial adviser.
Fali Mistry is a Registered Financial Adviser at Mazda Financial Services Limited based in Auckland. He is a Member of the Institute of Financial Advisers. Phone: 0508-467872; (09) 6255060; Mobile: 021-426858; Email: fali@insuresecure.co.nz; Website: www.insuresecure.co.nz
