Six mistakes people make when organizing insurance.
Personal insurance is something everyone needs at some point in their life. Due to the complexity of the life insurance environment in Australia financial advisers are vitally important in helping people find the correct mix of personal insurance coverage.
An adviser’s job is to help you avoid the mistakes I have listed below. These mistakes are made by people who have organized insurance themselves.
Not knowing your policy
This will have to be the most common mistake. The biggest mistake is not knowing what’s in the fine print of the policy, what’s covered, and what’s not. If you don’t have an adviser you will need to do this research yourself, it’s not good enough to rely on the “advice” of the sales representative from the insurance company. When disaster strikes you want to be getting money at claim time. You also don’t want to be one of those people who were eligible to make a claim but don’t.
Going with the basic insurance through your super fund
Being stingy and just having basic insurance through your super fund can be a costly mistake as the years go by. Relying on the default levels of cover might mean you are underinsured; this means you won’t have enough cover to repay debts and survive financially after a successful claim, or you might be paying more than you should. If you are a non-smoker and in a healthy weight range, you are helping subsidize the unhealthy smokers’ premiums. This is because you are all covered by the same policy.
Only comparing the premiums
It’s important to compare insurance companies and select one with competitive prices but this comes back to point 1 ‘know your policy. Make sure you are comparing ‘apples for apples in terms of the definitions of what’s covered. The age-old philosophy comes to mind; you get what you pay for.
Being under or over insured
The insurance you get could be too much, or not enough. It is difficult to determine how much insurance you really need. There are loads of online calculators but most are provided by insurers! This might mean you are getting more than you need. It’s also not advisable to rely on a ‘rule of thumb method’ and go with a multiple of your income as everyone’s circumstances are different s o the levels of cover should be linked to your financial goals and objectives.
Going with the wrong mix of insurance
In connection with point 1 ‘Not knowing your policy’ you might end up having the wrong mix of insurance. Make sure you understand the insurance policies you are getting and why you are getting the coverage. For example, you might end up with too much life cover and not enough disability and income protection cover.
Not reviewing your policy regularly
As your career advances and your life changes your insurance policy premiums increase, and you could be paying too much for something that is no longer the priority and not has enough of what you need. You might also have a premium loading that is able to be removed. Insurance is a cost so this should be reviewed every year in line with your goals and objectives to determine whether you are only paying for what you need and whether you are saving money where you can.
In summary, I am sure there are other mistakes people have made but this list highlights the value of getting the right advice when it comes to protecting yourself and your family.
Feel free to reach out if you have any questions.