We often hear about how New Zealanders are badly underinsured. We have one of the lowest rates of coverage in the OECD and too many of us have far too little standing between us and financial hardship.
But it’s also possible – although not as common – for people to be overinsured, especially if their circumstances change over time.
Here are a few things to think about to determine whether you might be one of them.
You have ‘too much’ life insurance
When you’re young and life insurance is more affordable, it’s tempting to take out a policy for a large amount.
But having much more cover than you need means that you’re paying over the odds in premiums each month, especially if you’re getting older with a stepped (age-related) policy that’s becoming more expensive.
You could use that money for other purposes, to build your financial resilience, or even use it to take out a different type of cover that’s appropriate to your situation.
Every once in a while, make sure you check what insurance you have in place and whether the amounts covered are still appropriate, or whether they should be dialled back. We can help you adjust the level to maximise value for money.
Your debt is paid off
Maybe you took out insurance when you first bought a house, as many people do, so that if something were to happen to you, your family could pay off the mortgage.
But if you have managed to pay off your mortgage over the years, you might not need such a significant life insurance policy in place anymore. Once again, that insurance budget could be diverted to other policies that would be more useful, or to other spending or investment.
Your kids have left home
When your children are young, it can sometimes feel like everyone is depending on you to bring money into the house each month.
You might have loaded up on income protection policies knowing that you needed to continue to support your family with those insurances if you were unable to work.
Maybe you loaded up on trauma insurance so that you could keep your household running, such as paying for childcare or home assistance, if you became seriously ill.
If you’re back being just a couple or a single person again, consider whether or not your cover is still aligned with your circumstances. And of course, get in touch; we are here to help you understand your options.
You’ve stopped working
If you’ve retired, semi-retired, or are just taking a break from the workforce, it’s a good time to reassess your insurance policies. If you plan on needing them again in future, you may need to leave them in place to avoid any pre-existing conditions creeping in. But if you don’t plan to return to paid work, you can probably drop some, such as your income protection policies.
You have significant investments
Insurance is about moving risk that you don’t want to carry yourself. If you have significant investments that could be called on to pay a lump sum amount or to generate income to live, you may not need to pay for an insurance product to do the same thing.
You haven’t checked your sums insured
Do you know what your car is insured for, or your contents? If you took out an agreed-value insurance policy when they were brand new, you may now be paying for a sum insured that’s too high.
You’re doubling up
Most insurance policies have a clause that means they won’t pay out if another policy has covered the same event. Run an inventory on your insurances to make sure that you’re not paying for the same cover twice.
We are in your corner
Whenever your life changes and you’d like to ensure that your Insurance plan is still working for you, please get in touch. We can help you fine-tune the details of your existing policies and explore your options for additional cover, to maximise value for money and minimise risk.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.