Tips for structuring life insurance in a changing world
7th August 2020
Some great tips here from Grant Willis, Executive Manager, Life Portfolio at Asteron. Talking about how small changes to the structure of your life insurance can help if your needs have changed.
How can life insurance help you?
Life insurance can help to protect the lifestyle that you have worked so hard to create, as well as the people you love. Maintaining your current cover for as long as you might need it may be the best option for you. But if your circumstances have changed, there are some simple options you can discuss with your financial adviser, which could mean you don’t need to spend as much on your personal insurance by restructuring your cover.
Which premium structure is right for you?
Your life insurance premiums can be structured as either stepped or level. Which structure you choose affects the cost and profile of changes to your premiums over time. You can also choose a combination of both.
Stepped premiums start lower but increase yearly as you get older. This is because of your likelihood of claiming increases as you age. As a result, changes in your yearly premiums tend to be gradual.
Level premiums start higher but they usually stay constant over the life of your policy. This makes budgeting easier and can even potentially save you thousands over time.
Choosing a stepped premium structure might be a good option if you only need insurance in place for a specific period of time – or your need for insurance might reduce as you age.
Either option could save you money over time, so it is well worth checking with your financial advisor to determine which option best suits your insurance needs.
Do you have the best income protection benefit period or sums insured to suit your needs?
Your benefit period is the length of time you receive payments from your insurer if you are unable to work due to one of the reasons specified in your policy. A longer benefit period usually means your premiums are more costly.
Your benefit period could be two years, five years, or until you are aged 65 or 70 years old. As your lifestyle changes, so might your benefit period. Assessing your insurance needs regularly ensures you don’t pay for the cover you don’t need.
For example, if you have young children or have just purchased a new home, you might have an increased need for income protection. However, as you get closer to repaying your mortgage, or have greater financial security, you may decide you no longer need life insurance cover dollar matched to your initial lending.
Check your waiting period
The waiting period you select directly affects your premiums for income protection policies. This is the length of time you will need to wait before you can start receiving payments after a claim is accepted. Usually, the longer waiting period you have, the lower your premiums will be.
Waiting periods can be anything from two weeks to two years. When setting the waiting period, you might want to consider how long you think you can manage your household expenses without an income. Other factors to consider include whether you have any annual leave that you can use or if you have savings set aside which you could rely on.
Speak to a trusted expert to help you review your life insurance
Talking to your financial advisor is a great way to help determine if some of these options could be right for you. They can assess your insurance cover and work with you to structure it to suit your budget, lifestyle, and circumstances. You may also be able to save money by having all your cover with one insurance company.
Thanks, Asteron for these great tips, to read more from Asteron click here!
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