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Charne Olivier

A new year naturally comes with the mindset to renew and review and let that also apply to your insurance policies. It is a good habit to regularly align your policies with your situation, since changes in your life can cause you to either be under or over insured – and neither is a good situation to be in.

If you haven’t updated your insurance policies in a while, here are the three things to think about when you assess your policies – your cover, the premiums, and the risks. Let us take a closer look. 

Is the cover still accurate?

Many possible life changes can affect your financial position such as the birth of a child, moving houses, changing jobs, inheriting money and/or assets, selling or buying assets, to name a few. All the above-mentioned changes may require you to adjust your policies cover and although these may seem like the obvious life changes to consider, what about buying or selling home appliances, jewellery or electronics?

Also consider home improvements that you may have had done to your home or if you took out a maintenance plan on your vehicle. Make sure to update the items insured as well as their values with your insurer to ensure that your insurance cover accurately reflects your asset register. 

In terms of income protection or disability policies it is also important that you notify your insurer when your salary increases or decreases as it may change the value of the policy ensuring you remain adequately covered. 

Life insurance should also be assessed regularly, although this may require you to sit down with a financial adviser to ensure that your life cover is enough. Things that will be considered as debt, future needs, other policies you may have, your assets and savings and how liquid they are as well as the number of people that are financially dependent on you. 

What can possibly affect the premiums of your policies?

Keep in mind that when you claim from an insurer, they cannot replace your damaged or stolen item at a value higher than what it was worth. This principle stems from insurance policies that cannot be used to make profit. Also remember that insurers will not pay out anything more than what was stated as the replacement value of the policy. 

Therefore, it is your responsibility to make sure that all your assets reflect their true value otherwise you may be paying premiums in excess of what you can claim for or when you do claim you might be in a worse situation than before.

Cars, furniture, and electronics are a few items that may have varying replacement values. This may be due to wear and tear that can decrease the value. Remember that demand and supply as well as exchange rates may also play a role in the value of your asset increasing or decreasing. 

Assess the possible risks associated with your policies

Keep in mind that insurance is all about risk and should you mitigate the risk of an insurable event taking place, it should be reflected in your policy. Inform your insurer when you have installed an alarm system at your home or a tracker in your car.

Also actively think about what you can do to lower risks of any of your insurable events. This may even be in the form of going for regular check ups or kicking a bad habit such as smoking as this can lower the premiums of your life insurance. 

Going forward, make it a habit to inform your insurer as and when changes happen to your situation or assets. In addition, make it an annual exercise to assess if all the information your insurers have of you and your assets are up to date.

It really is only for your benefit to ensure you are covered adequately. Good discipline with your insurance policies is one of the core steps towards having a sound financial plan in place. 

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Charne Olivier - Articles provider for My Wealth Investment

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