Many of us think of insurance merely as a necessity – something we have to have. But insurance is more than that. It is an essential component of financial planning that can also be your safety net.
Insurance can protect you and your loved ones from financial difficulty after an unpleasant event occurs or in the face of unforeseen circumstances – like an accident, illness, or injury. It can be a means for you to go on unfazed (finance-wise) and lift the burden a little, while you deal with the circumstances that life has thrown at you.
Insurance can also come in handy when costs pile up towards home repairs, travel changes and/or theft and robbery. In many cases, insurance money can soften the blow, provided you have the right cover of course.
So, insurance deserves more attention from us. Yes, it needs to be affordable, but more importantly, it needs to be comprehensive. In fact, truly valuable insurance will provide the right coverage for you and fit in properly with your lifestyle – all at a reasonable price!
In this week’s article, we discuss the factors that you must consider when you buy an insurance policy. As well as the cost of premiums, what is and what isn’t covered, and what you need to do to improve your risk profile.
1. Finding the right cover
Finding the right cover is a matter of knowing yourself, your lifestyle and the things you want to protect. It needs to be comprehensive enough to cover everything you value. It may be a good idea to engage an adviser at this point as it simplifies the process considerably and can add a lot of value.
Keep in mind that your needs may differ depending on your specific situation, your outlook and your goals. You will need a different cover depending on whether you are an individual or a business owner. Consider insurance companies that are trustworthy and have a good reputation. It is also important that the companies you consider should be financially stable and have the capacity to process any claims you may raise.
Your adviser will keep all these factors in purview and ensure that you are adequately protected.
2. Selecting the premium structure
Consider a premium structure that suits your financial situation – stepped or level. In the stepped premium structure, the premiums continue to increase each year until the end of the term. While in a level premium structure, the premiums stay the same. Each structure has its own pros and cons depending on what you want to achieve.
Another important consideration to make is whether the premiums are cost-effective, not unnecessarily expensive or needlessly inexpensive. Carriers that offer seemingly low prices may be new to the market or the policy may not provide enough coverage.
Further, for insurance other than life insurance there is one other thing to note – the deductibles on your policy (as they may also impact the premium you pay.) A deductible is an amount of money you are responsible for paying when you file a claim. A higher deductible often means you are paying a lower premium, and vice-versa.
3. Improving your risk profile
Improving your risk profile is about making yourself more attractive to the insurer (and in doing so getting to lower your premiums payout.) It may sound complicated and farfetched, but there are a few steps that make it incredibly simple to achieve.
For example, if you are a smoker, your monthly premiums can be higher because you’re more prone to risks than non-smokers. So, consider switching to a healthier lifestyle. If not, it may not be the end of the line just yet. There are heaps of other things that can help – putting deadlocks on doors and windows, cleaning up your driving record, taking a defensive driving course, and even cleaning up your credit score.
4. Reviewing your policy
Your needs change as you progress through life and achieve milestones. Your insurance needs may change too. You need to ensure that the cover you have suits your current situation. This is why it is important that you keep a lookout and review your policy on a regular basis. If you’ve engaged an adviser, they will keep you updated and informed.
It is also essential to review your policy before you renew it. Check specifically if you need a different level of cover from the previous year. For example, has your house appreciated or depreciated in value? Have you bought an entertainment system or upgraded your furnishings? Do you need special or high-priced items, such as an engagement ring or an exquisite art piece, to be listed as part of your cover?
Again, an adviser can be especially helpful in these cases – with strategic advice, timely reminders and notifications – so you don’t miss out on any opportunity.
5. Talk to an adviser if you need help
The subject of insurance is complex and dynamic. From choosing the right insurer to getting comprehensive cover in place – there is much ground to cover. Ultimately it is about safeguarding what’s important to you and talking to a financial adviser may be helpful in this matter.
Advisers have qualified knowledge and insight of various insurers and their products in the market. They can help you pick and choose the types of cover that are most important to you given your life stage and circumstances. Advisers provide advice on how to best handle your claim, should the situation occur, and assist you in the process. But above and beyond this, advisers will help you save both your money as well as your time.
At BFD Financial Planning, we care about your financial future and your peace of mind. We provide personalized financial advice on insurance to suit your life-stage and lifestyle. Talk to us today. We would be delighted to hear from you. info@bfdfp.com
General Advice Disclaimer
The information contained on this website and in this blog-post is general in nature and does not take into account your personal situation or circumstance. It is recommended that you consider and use the information provided responsibly, and where appropriate, seek professional advice from a financial adviser.
Although, every effort has been made to verify the accuracy and correctness of information, BFD Financial Planning, together with our consultants, officers, agents, and employees, disclaim all liability for any loss or damage suffered by any persons directly or indirectly relying on this information.
Steven Roberts
BFD Financial Planning
