Reviewing and Updating Your Insurance Portfolio

The Importance of Regular Insurance Reviews

• Back in the 1900s, the unsinkable Titanic embarked on its inaugural journey, outfitted with the most advanced technology of its era. However, there was one significant flaw—lifeboat capacity. Although the vessel had insurance, the lifeboats weren’t sufficient for all passengers. The consequence? A disaster that could have been lessened with consistent evaluations and modernizations of safety regulations.
• Now, while your insurance portfolio doesn’t involve lifeboats, the concept is still applicable: you don’t want to uncover weaknesses in your safety net when it is too late. Have you ever taken a moment to evaluate your insurance coverage? Perhaps you enrolled in a policy several years ago, and it has simply been running without much consideration. But what if that policy is no longer adequate? Life evolves rapidly, and the requirements you had when you initially obtained your insurance might appear very different now.
• Just like you monitor your bank account or refresh your wardrobe occasionally, your insurance portfolio requires a routine assessment as well. It’s not merely about possessing insurance—it’s about having the appropriate insurance, at the appropriate time, for the right reasons.

Life Changes, So Should Your Insurance

• Consider all the significant milestones you have encountered throughout the years. You may have gotten married, had children, purchased a home, or changed jobs. These life changes introduce new challenges and, frequently, new financial obligations.
• When those transitions occur, the insurance policy you acquired years ago might not be suitable for your current needs. For instance, a single individual with a modest apartment may not require the same amount of life insurance as a couple with two children and a mortgage. Likewise, if you have recently launched a business or received a promotion, your coverage might need modifications to align with your income and lifestyle.

• The essential message here is straightforward: life changes, and so do your insurance requirements. By reviewing your policies at least once a year, you guarantee that your coverage adapts with your changing circumstances.

Underinsurance: A Silent Threat

• Here’s a thought to ponder: What would transpire if an unforeseen event arose, and your insurance failed to cover all expenses? Being underinsured is a risk many individuals do not recognize they are taking until it is too late. Despite the existence of millions of life insurance policies, India, as a nation, is significantly under-penetrated. One of the contributing factors is underinsurance.

• Let’s envision for a moment. You encounter an accident or face a medical emergency, but the insurance you possess is no longer sufficient to handle the medical costs. This could lead to a financial disaster. Or perhaps your life insurance is inadequate to support your family’s living expenses, placing them in a challenging situation.

• That’s why regularly checking your coverage is extremely essential. You must ensure that your insurance reflects your current life stage, so you are continuously protected—regardless of what life presents.

Big Life Events, Significant Insurance Decisions

• It’s simple to overlook your insurance until a significant event occurs in your life. But that’s precisely when you need your policies to perform their best. Let’s examine several life events that should prompt you to reconsider your coverage.

• Marriage or Divorce: When you marry, your priorities change. Your spouse relies on you in new ways, and your life insurance should represent that. Conversely, after a divorce, you might want to modify your beneficiaries or change the coverage based on your new financial circumstances.
• Having Children: Becoming a parent is one of the primary reasons to assess your insurance. With a new child depending on you, it’s essential to have the appropriate life insurance to secure their future. Consider investing in a savings plan or children’s plan that can offer life cover and establish a fund for their future requirements.
• Buying a Home: A mortgage is a significant financial obligation. If something were to happen to you, your life insurance should be sufficient to cover that. Evaluating your policy when purchasing a home is a wise decision.
• Thinking of Retirement: Once you reach retirement, your salary ceases. While you might have savings, will they be enough considering inflation and rising living expenses? Investing in ULIPs may assist in generating income since the returns are linked to the market while also providing life coverage.

How Inflation Affects Insurance Coverage

• You might not be aware of this, but inflation can gradually diminish the effectiveness of your insurance. Over time, the purchasing power of money declines, which means your policy might not offer as much coverage as it did when you initially purchased it. Presently, inflation is typically around 5-6% yearly. Medical costs, in particular, tend to increase at a higher rate than inflation. Thus, your health insurance may require an adjustment to keep pace.

• Regularly reviewing your policies will help address these inflationary impacts, ensuring you are not surprised when your insurance begins to seem insufficient. Factoring in inflation is a straightforward yet essential step in maintaining relevant coverage.

Insurance as an Investment in Your Future

• Insurance is more than merely a safety net. It’s also a form of investment. Over time, certain insurance plans can appreciate in value, especially if you have opted for policies that offer long-term benefits such as life insurance equipped with bonuses or returns.

• The reassurance that comes from knowing that your family is financially safe is invaluable, but the added advantage is the knowledge that there’s also a possibility for financial growth. By evaluating your portfolio, you ensure that you are maximizing the benefits of your policies. You might uncover new advantages, add riders to bolster your coverage, or even consolidate policies for better value.

How to Check Your Insurance Portfolio

• Unsure how to proceed? Here’s an easy guide to assist you in starting:

• Keep Policy Documents Handy: Arrange all insurance documents in both physical and digital formats. Utilize a home folder and backup with scans on your phone or cloud for convenient access at any time.
• Review Coverage Amounts: Is your insurance still adequate to fulfill your needs? Consider inflation, healthcare expenses, and any new financial obligations.
• Check the Fine Print: Ensure you are fully aware of the terms and conditions of your policy. If there is anything unclear, contact your insurance provider.
• Update Beneficiaries: Life events can result in modifications regarding who should be the beneficiary of your insurance. Ensure these details are current.
• Look for Deficiencies in Coverage: If you identify gaps in your coverage, take measures to address them. Include riders for accidental death, critical illness, disability, etc.

Conclusion

• Consistently assessing your insurance portfolio is one of the most effective ways to safeguard your future. By keeping it current, you ensure that your coverage consistently matches your evolving life, securing your loved ones and your peace of mind.

• Therefore, allocate time to review your insurance annually. It’s a minor investment of time that can significantly impact when life’s unforeseen circumstances arise.