Moving house, starting a family, getting that long-awaited promotion – life is full of changes, which is why the insurance policy you took out a few years ago might not be the best policy for you now.
When you take out a mortgage, purchase an investment property or embark on a new business venture, it is important to ensure that you have adequate insurance to cover your assets. It is also in your best interests to consider life insurance and income protection, should you find yourself in a position where you are unable to work. Once you have taken out insurance, review it annually so that your level of cover matches where you are at in life. Should the worst happen, the last thing you need is to be stressing about finding the extra money you could have been insured for.
When taking out an insurance policy or renewing your existing cover, ask yourself the following questions:
Am I prepared for the ‘what ifs’?
It’s easy to tell yourself ‘it will never happen to me,’ but that isn’t always the case. If something should happen to your property, your business or your health, will you have the funds to cover your mortgage repayments and other basic expenses? If you answered no, it is time to reconsider your level of cover. Carefully read your policy, assess your coverage and compare this against the value of your assets and regular expenses.
What level of cover do I need?
It’s very common for Australians to be underinsured, which means that if something happens to them, their policies won’t cover all of their costs. How does this happen? It happens because people have either undervalued the worth of their assets, or they haven’t updated their policies in some time.
An easy way to avoid this is to check your coverage each year and re-evaluate the value your assets. Have they appreciated in value? Have you purchased new big-ticket items such as jewellery or electronics that you will need cover for? When tallying these figures, consider how much your assets are worth now, as well as how much it will cost you to replace them. Your level of insurance should be enough to cover the latter.
The same principles apply to other insurances such as life insurance and income protection. Calculate your monthly expenses and current salary, and ensure that your level of protection is enough to match these.
What features are important to me?
The features you need in your insurance policy differ depending on what stage of life you are at. Carefully check your Product Disclosure Statement for any changes and call your insurance company to see if they have different levels of cover that are better suited to you. Consider all the types of risks you could encounter, such as illness, severe weather events or the loss of a business partner, and check that you are covered for such events.
Do I need to consult a financial planner?
With so many insurance companies to choose from, keeping on top of your options and preparing for those ‘what if’ scenarios can be overwhelming. When my clients take out a mortgage through me, I always encourage them to consider their levels of insurance. You work hard to build up your assets and they are worth protecting. For some guidance, I can put you in touch with a Mortgage Choice financial planner. By taking advantage of a free initial consultation, you will put yourself on the right path to securing your financial future.