Introduction to insurance policy review & its importance
Some insurance plans might be long-term, like life insurance, which runs for a continuous period. Alternatively, some plans might be annual plans or run for a couple of years. Whether long-term or short-term, reviewing your insurance policy is important.
Reviewing an insurance policy means checking the coverage amount and features of the insurance plan to understand whether the coverage is suitable to your needs or not. A regular review is recommended to ensure that your policy continuously meets your financial needs.
Why insurance policy review is important?
Some reasons why insurance policy review is important are as follows –
1. Changing financial needs
During your lifetime, your financial needs might change with time. For instance, when you are in your 20s, you might want to save up for your short-term financial goals like buying a car, a mobile phone, etc. However, when you get married and start a family, your goals change to saving for a house, child planning, etc.
If you have insurance policies meant for your financial goals, like savings-oriented life insurance plans which help you create a corpus for your financial goals, you need to review the policy to ensure that it would create the funds needed for your goals. Moreover, if your goals have increased, a review would help you buy a new policy to plan for the new goals.
2. Assessment of coverage features
Insurance plans offer a specific set of coverage features. A review of your insurance policy can help you figure out whether the coverage features are optimal or do you need to enhance the coverage for enhanced financial risks.
For instance, say someone in your family is diagnosed with a critical illness, like a heart-related condition. You think adding a critical illness cover to your existing life insurance policy would give you additional coverage if you suffer from any critical illness, which is covered under the plan, in the future. As such, when you review the policy, you can choose the critical illness add-on to improve the scope of the policy at a nominal additional premium.
3. Adequacy of coverage amount
A review helps you assess whether the coverage level of your insurance policy is adequate or not. If your financial needs have increased or decreased, it’s better to adjust your coverage level too. A review helps you assess this adjustment so that the policy aligns with your needs.
4. Addition or removal of optional coverage benefits
Many insurance plans offer optional coverage features available at an additional premium. When you review the coverage, you can assess whether you need optional coverage features available or whether the features added to the policy are to be removed.
For instance, say you opted for the accidental death benefit rider when buying a life insurance policy. You decide to remove the existing rider and substitute it with the more comprehensive option which also covers disabilities. So, on review, you can remove the existing rider and opt for another which would give additional protection.
What to review in the insurance policy?
Some things to review in your insurance policy are as follows –
- The coverage amount – whether it is optimal or not. If not, find out how much enhancement is needed
- The coverage features – whether the policy provides coverage for the losses that you expect. If the features are limited, you can port to another policy offering more inclusive features or add the required features if they are available on an optional basis
- The optional coverage benefits required
- Whether the premium of the policy is affordable or not. If not, how to make it affordable?
How to review the insurance policy?
Here are some tips that can help in reviewing the insurance policy –
- To check the adequacy of the coverage amount, you can use insurance calculators. There are life insurance calculators that help you assess the adequate coverage level based on your needs and goals.
- Check whether the coverage features cover the expected losses
- Check for optional riders and find out if they are needed or not
Most common life-changing event questions to consider for insurance policy reviews:
Some of the common life-changing events why insurance policy reviews are important are as follows –
1. Marriage:
When you marry, another individual’s responsibilities get added to yours. You start a family and plan for your joint financial goals. This might increase your goals and a review becomes important.
2. Childbirth:
The addition of a child to the family also necessitates an insurance policy review. This is because you have to plan for the child’s future needs like education and marriage. Moreover, you plan to provide a secured financial future for your child.
3. Job change or promotion:
If you change your job or get a promotion, your salary might increase. This increase might allow you to plan for new financial goals or increase the standard of your lifestyle. As such, reviewing your existing coverage is important to ensure that the coverage is sufficient to cover your enhanced goals or lifestyle expenses.
Conclusion:
Understand why insurance policy review is important and review your coverage regularly. See if the coverage is optimal or if there is any room for improvement. If the coverage is to be enhanced, increase the coverage to make your policy sufficient for your financial needs.
FAQs
1. If needed, when can I make changes to my existing insurance policy?
If your insurance policy needs a change, you can do so at the time of renewal. Upon renewals, you can make changes to the coverage amount and features to make sure that the policy is suitable for your financial needs.
2. Does reviewing insurance policy increase the premium outgo?
If you increase the coverage amount and coverage features, the review would increase the premium outgo. However, if you remove optional coverage features which are not required, the premium outgo would be reduced. Similarly, in the case of porting, if another policy offers better coverage features at lower premiums, the premium outgo would reduce.
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