Over the last few months we have identified a number of issues and mistakes that we are frequently seeing people make in relation to their insurance cover.
Highlighted below are a number of these issues and I would encourage you all to review these and consider these issues in relation to your own cover. Have you made the same mistakes? Addressing these points can result in significant cost savings, whilst actually improving the quality of the cover that you have in place.
How old is your policy? Medical advancements and product improvements mean that more comprehensive (yet more cost effective) policies may be available - and sometimes even with your existing insurer.
Do you have insurance through an industry super fund? Their premiums have increased substantially of late, whilst the policy definitions in some cases have even become more restrictive – making it harder to claim.
Do you have a husband/wife/partner/family member with cover? Is their cover with the same insurer? Does that insurer offer multi-life discounts? Only a select number of insurer’s do and the discount can be as worth as much as 5% per year - each. Likewise, are all of your covers with the same provider? Most insurers will offer a multi-policy discount, which again can save you as much as 5%.
When did you last review your sums insured? You may be over-insured and paying more than you need to for your policy… or worse, you might be underinsured and face financial hardship in the event of a claim.
Do you have children between the ages of 2-18? If so, you should consider adding them on to your trauma policy. If you don’t have a trauma insurance policy, you should have a very good reason for this - the cover is invaluable.
Have you got insurance in place but have never been underwritten for the cover? You might be in for a few surprises if you ever need to claim on the policy. Similarly, many people have cover in place through their super fund of which they are not even aware. If you have multiple income protection policies in place, you might find trying to claim on these policies an extremely strenuous process.
And most importantly - have you got a level premium? If you are planning on holding your policy for a substantial period of time then a level premium should be a real no-brainer in most cases. Industry Super funds and other non-specialist provider’s usually do not offer this premium option.
In fact, many people are not even aware of what a level premium is. Below is a very brief explanation for your reference.
There are two main types of premium structure; a ‘’stepped’’ premium and a ‘’level’’ premium.
- Stepped premium — The premium rate is dictated by the age of the life insured when the policy starts and each subsequent policy anniversary date. In other words, the premium increases each and every year as the life insured grows older;
- Level premium — The premium rate is dictated by the age of the life insured when the policy starts but it does not change as the life insured grows older. The premium rate is locked in for life based on the age of the life insured at the time they take out the policy.
A third less common premium type is a ‘’unitised’’ premium. This is similar to a ‘’stepped’’ premium, with the main difference being that the sums insured automatically decrease as you age.
You do pay more initially to secure a level premium. However, if you intend to hold the policies for a substantial period of time then a level premium can provide you with significant long term savings (although there are some circumstances in which a level premium may not be appropriate to your needs). Essentially what happens with a ‘stepped’ premium is that the cover begins to become unaffordable, just as the chances of you making a claim increase. A level premium truly is the only way to ensure the long term affordability of the cover. The graphic above demonstrates this scenario.
If you have not reviewed your insurance recently, please contact your Partners Wealth Group advisor on 1800 333 143 to discuss your specific requirements and see which insurance cover is best for you.