16 Dec Easy Way To Top Up Your Life Insurance
Your cover is designed to be flexible
As your life changes and your responsibilities expand, your life insurance should expand with it. And if you’re thinking that sounds like a lot of effort, think again. Most policies allow you to increase your cover without any medical checks or complicated forms when major life events occur, like having a child or increasing your mortgage. In fact, that’s exactly how your cover is designed to work.
Insurance isn’t ‘set and forget’
A common misconception about life insurance is that it’s a ‘set and forget’ arrangement that doesn’t need to be reviewed regularly. The problem with that approach is that life inevitably changes.
Say you bought life insurance when you got engaged or married, as many people do. You probably bought it to protect the lifestyle you enjoy with your partner. So what happens if kids come along? Or you move to a bigger house with a bigger mortgage? Or you start your own business?
All of a sudden your financial responsibilities are much bigger. And that should be reflected in your life insurance – to make sure it covers everything you need it to.
How do I increase my cover?
The ‘future insurability’ feature of most life insurance policies gives you the ability to increase your level of cover without having to provide any medical evidence. Some policies taken out policy through an adviser, are able to do this every three years, or every 12 months if a major life event occurs such as#:
- Marriage or divorce
- Becoming a parent or carer
- Increasing your mortgage over your own residence
- A salary increase of 15% or more
- An increase in the value of your business
Please note you may not be eligible for this feature if you were over age 50 when you started some life insurance policies, or if you have a premium loading of more than 50%.
# The increased cover may be accident only for a certain period, check your policy’s terms and conditions for full details
How much can I increase by?
Policies with different insurers may differ, however many can increase your cover without medical evidence by up to 25% of the original amount insured, or $200,000 (whichever is less), for each major life event, also known as a ‘trigger event’ (eg. marriage, divorce, retirement etc).
So if you started with $500,000 of cover, you could potentially increase your cover by up to $125,000 per trigger event– simply by filling out one short application form and providing proof of the trigger event (e.g. marriage certificate).
Over time you can potentially use this feature to double the amount of your original sum insured, capped at $1 million overall.
You should bear in mind any increase in your cover will increase your premium, which is something your financial adviser can help you balance.
What if I need a bigger increase?
Your financial adviser can help you work out how much extra cover you need and generate a quote for you on the spot. If your increase is bigger than what’s allowed through the future insurability feature, you may need to do some medical checks.
What if I need less cover?
Just as your cover needs can increase as your life changes, they can decrease as well – e.g. as you pay down your debts or your children get older and become financially independent. That could mean you’re paying for cover you don’t need.
That’s another reason why it’s a good idea to review your cover with your financial adviser every 12 months – or when major life events occur – so you can make sure you’ve got the right level of cover, all of the time.