SIX MISTAKES PEOPLE MAKE WHEN ORGANISING INSURANCE
Personal insurance is something everyone needs at a point in their life. Due to the complexity of the life insurance environment in Australia financial advisers are vitally important helping people find the correct mix of personal insurance cover.
An adviser’s job is to help you avoid the mistakes I have listed below. These mistakes are made by people who have organised insurance themselves.
1. 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.
2. Going with the basic insurance through your super fund.
Being stingy and just having basic insurance through your superfund 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 subsidise the unhealthy smokers’ premiums. This is because you are all covered by the same policy.
3. 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 on what’s covered. The age old philosophy comes to mind; you get what you pay for.
4. 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 a most are provided by insurers! This might mean you are getting more than you need. Its 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.
5. 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 insurances. Make sure you understand the insurance policies you are getting and why you are getting the cover. For example, you might end up with too much life cover and not enough disability and income protection cover.
6. Not reviewing your policy regularly.
As your career advances and your life changes your insurance policies premiums increase, you could be paying too much for something that is no longer the priority and not have 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 you are only paying for what you need and 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.