In this article I’m going to be looking at why we should periodically review our Life Insurance and Critical Illness policies. What life changes can affect our premiums? And how?……
If you drive, and you’re anything like me, as soon as you know your insurance is up for renewal (and maybe even just before) you’ll find yourself on one of those comparison sites seeing if you can save yourself a few quid. Of course, Life Insurance policies last 20-30 years, so it’s not really something you think about as regularly. But maybe you should. For most of us life changes frequently, meaning your cover may no longer adequately suit your needs. Some life-changing events that might mean you need to take a look at your policy include:
- A New Job – If you have a new job, it would be a good idea to review your Life Insurance policy to check that you have enough cover. Maybe your old job came with some risks that increased your monthly premiums, or your income is vastly different, and you lead a different lifestyle now because of it. Alternatively, you might have lost your job, and will want to review your insurance options to save money.
- You Got Married/Divorced – If your marital status changes then your Life Insurance needs will change too. If you have just got married, then you might want to increase your cover so that your spouse is looked after in the event of your death. Or maybe you have recently got divorced, in which case you might want to reduce your cover instead. Related to this is making sure that you review your policy so that the people who stand to receive your money are listed correctly – if you haven’t added your new spouse to your policy, and your Life Insurance was taken out during a previous relationship, you could find that your ex-partner stands to receive some money if you were to die. I don’t think your new partner would be happy with that…
- You’re Having A Baby! – Congratulations! This is going to cost you, in more ways than one! And one such way is when it comes to insurance. Even if they have never had Life Insurance before, most people will take out a policy once they have dependents who will need to be taken care of if they were to pass. Or, maybe your kids are older and have moved out, or have jobs and families of their own now, in which case you might feel that they are no longer financially dependent on you and you can reduce your Life Insurance cover, and in turn, your monthly premiums.
- Your Health Has Changed – Making positive lifestyle changes that affect your health, such as losing weight or quitting smoking can affect your Life Insurance premiums by bringing them down, so it’s worth reviewing your policy and speaking to an advisor if your health has improved for the better.
- Your Housing Status Has Changed – If you’ve just got a mortgage and don’t already have a Life Insurance policy, now would be the time to get one – especially if you have young children, as it will ensure that your mortgage will be taken care of if you were to die. Or it could be that you have just paid off your mortgage and you feel that you don’t need so much cover now and could therefore reduce your monthly premiums.
- Your already have a policy coving your mortgage – a lot of people will have a decreasing form of Life Insurance they took out when they moved into their new home… how long ago was it since you reviewed that policy, if your mortgage has come down a nice chunk, these types of policies will now be cheaper if you take out a new one.
All these things will affect how much Life Insurance coverage you need. Generally speaking, if your net worth increases then you should increase your coverage, for example if you have a large mortgage or debts that your family would struggle to pay in the event of your death. If your insurance needs decrease however, such as your mortgage being paid off or your children no longer needing your financial support then you could look at lowering your coverage.
Critical Illness cover also pays out a lump sum to help ease the financial burden for your family – except this time you’ll be alive, although too ill to work. This type of cover will cover the ‘big three’; cancer, heart attack and stroke, and then, depending on the insurer, up to 100 other critical illnesses.
So, surely the reasons for reviewing my Critical Illness Cover are largely the same as the reasons for reviewing my Life Insurance. In a nutshell, yes. Critical Illness cover certainly becomes more important once you have a family to support and a mortgage to pay, so what are some of the differences when it comes to reviewing your policy?
- More Illnesses Are Now Covered – Perhaps you took your Critical Illness Cover out 10+ years ago and are still in the same job. The kids are a bit older, sure, but they will still be relying on you financially for a good many years to come yet. So, no need to review then is there? Well, 10 years ago policies only insured you for around 30-40 illnesses, whereas nowadays you can insure yourself for 100+, so it’s well worth looking at your current policy to make sure that you have the most up to date cover.
- A New Job Or Promotion – it’s important with Critical Illness Cover that you review your policy if you change jobs. With different jobs come different risks, and depending on those risks your monthly premiums could be affected. Maybe your new job means that you now work with tools or chemicals, or, conversely, you’ve worked with dangerous substances for years, but a promotion means you now work an office desk job. Keeping your insurer informed of these changes means that you won’t be overpaying on your policy, or receiving less cover than you need.
- It Will Affect You More – This might sound a bit harsh, but Life Insurance obviously pays out when you’re dead, so if you haven’t reviewed your policy and your loved ones suffer financially because of it, you’re not going to know anything about it. A Critical Illness payout will also benefit you personally, and if you haven’t made sure that you’re adequately covered to suit your needs, you’ll be kicking yourself. Obviously, this will also affect your family if you are married or have dependents – only this time you’ll be alive to hear them moan about it.
- Better chance of claiming – I’ve left this to last because it’s in my opinion the most important one. In recent years, insurance companies to keep in line with modern science have changed the rules on how ill you must be before they pay out on a claim. I’ll give you an example – a lot of older Critical Illness policies require any strokes you have to result in permanent residual damage, if you make a full recovery, your stoke would have been deemed not critical enough for a pay out. Modern policies only require your stroke to result in symptoms lasting 24 hours. No permanent damage required.
I hope I have demonstrated, why you should review your life or critical illness policy. Now I don’t think you have to do it every year, I would say once every 4-5 years or any notable life changes would be appropriate.
If you would like myself or a member of my team to look at reviewing your existing policy, we will do this without charging any fees, we have access to every UK provider and if we can help you find a better plan will even cover your first months premium.
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