Besides setting new year resolutions and financial goals for 2021, here’s a reminder why an annual review of your insurance policies is a #Need.
It’s the start of yet another new year — cue new found determination to stick to your exercise routine, diet plans and monthly budget.
While it’s still early in 2021, here’s another goal to add to the list: sit down with your financial advisor to do a thorough review of your insurance plans.
We’ll admit, coffee with your advisor doesn’t exactly come across a first ballot new year to-do. But doing a review of your insurance coverage helps to ensure that your financial planning has a green bill of health.
Here are six reasons why you should do an annual review and the questions to ask yourself.
#1 Changes in your lifestage
Question to ask yourself: Has your lifestage changed?
A year can make a whole lot of difference. You might have gotten married, you could now be a parent, your parents might have retired or you might have another child to care for.
With each change in lifestage, big or small, you’d have to relook the insurance plans you have. Here’s are examples of what each change in lifestage could mean:
- If you’re now married: You might have to consider other types of insurance plans for your changing needs, such as home insurance or maid insurance.
- If you now have a child: Have you bought your newborn the necessary insurance plans?
- If you’re pregnant: What are some maternity insurance plans you can consider?
#2 Coverage required has increased
Question to ask yourself: Do you now need more coverage?
Higher coverage is required when you have more dependents. This means a higher sum assured that will help to look after your dependents’ needs even if you’re no longer around. As you grow with age, you might start to consider getting additional insurance plans such as critical illness plans or cancer insurance plans.
Changes in your job could also affect the coverage you require. For example, if you’re now a freelancer, you might require freelancer insurance plans that provide coverage for medical expenses. If you now hold a high-risk job, you might want to get a personal accident plan that provides greater coverage.
#3 Affordability of plan and your financial situation
Question to ask yourself: Do your existing plans remain affordable in your terms?
Has your situation changed such that you can no longer afford the plans purchased? If so, it could be timely to switch plans or cancel your plan for its cash value.
On the flipside, do you now earn more? If you do, perhaps you might have the financial muscle to increase your coverage based on your needs. You might also be able to afford a plan that can offer greater coverage in other areas. For example, cancer insurance, women’s health insurance and even a retirement plan.
#4 Industry shake-ups
Question to ask yourself: Are there changes in the insurance industry that affected your plans?
Back in August 2020, the definition of ‘critical illness’ in life insurance policies changed. This meant slight differences in how policyholders would be covered by insurers for plans purchased after 26 August 2020.
Riders, coverage and terms of insurance plans can also change. For example, maid insurance plans can now cover hospitalisation of your foreign domestic helper due to COVID-19. COVID-19 has also been included as an infectious disease covered in some personal accident plans.
You should also stay abreast of the changes to government policies, to know what you’ll be covered for. On 1 October 2020, CareShield Life and MediSave Care were launched to provide monthly cash payouts to Singaporeans who have severe disability or require long-term care.
#5 Changes in risk tolerance
Question to ask yourself: Can you still take the same risk you took last year?
Risk tolerance can refer to how much risk your portfolio takes on. Asset classes such as equities and cryptocurrencies come with higher risk as they are subject to market volatility. If you’re looking to reduce your risk, you can consider low-risk products such as insurance savings plans, endowment plans or bonds to grow your wealth instead.
Risk can also come in the form of choosing not to purchase adequate insurance. Is the risk of not being financially protected a risk you would like to take this new year? Rather than choosing not to purchase insurance, you can always opt for a more affordable plan for a start.
#6 Changes in habits
Question to ask yourself: Do you still have the same habits and hobbies?
Travel is a great example of how our ‘habit’ of travelling frequently has changed.
Pre-COVID, annual travel insurance plans made sense for those who travelled often, providing coverage for the whole year regardless of the number of trips made. However, annual travel insurance plans no longer make financial sense in 2021, with single trip travel insurance plans being more practical (if we get to travel at all).
Your hobbies and interests could also change. For example, do you now partake in a sport that could do with personal accident coverage?
Get adequate coverage this 2021
If 2020’s taught us anything, it’s to expect the unexpected. Should there be loopholes in your coverage, here are some articles to help you find the coverage you need:
- Best Integrated Shield Plans (IP)
- Best Critical Illness Insurance Plans
- Best Term Insurance Plans
- Best Cancer Insurance Plans
- Best Personal Accident Insurance Plans
- Best Short & Long Term Endowment Plans
Read these next:
Whole Life Insurance: Reasons Why People Choose It Over Term Life
Buy Term, Invest the Rest (BTIR): The Complete Pros And Cons Breakdown
Buying Insurance: Pros & Cons Of Limited Premium Payment Term
3 New Pay-As-You-Go Insurance Plans To Consider In 2021
Guide To Investment-Linked Policies (ILP): What You Need To Know
By Ching Sue Mae
A flat white, an adventure-filled travel and a good workout is her fuel. This Manchester United fan enjoys sharing knowledge on personal finance while chasing the dream of financial independence.