Insurance can be a tricky topic, but it’s one you can’t afford to ignore.
From personal experience, I know how easy it is to overlook your insurance policies until it’s too late.
Trust me, I’ve been there.
In this post, you’ll learn:
- What an insurance review is
- Why it’s crucial to review and update your insurance
- When you should conduct an insurance review
- How to conduct an insurance review effectively
Did you know that failing to review your insurance could leave you underinsured or paying too much for coverage you no longer need?
Scary, right?
But don’t worry, I’m here to help you navigate this with ease.
If you’re wondering how to ensure your insurance coverage is both adequate and cost-effective, keep reading.
This guide will help you understand everything you need to know about insurance reviews, so you can protect yourself and your loved ones better.
What is an insurance review?
An insurance review is a process where you evaluate and assess your current insurance policies to ensure that they provide adequate coverage, are cost-effective, and align with your current needs and circumstances.
Why is it important to review and update your insurance?
Regularly reviewing and updating your insurance is crucial for several reasons.
Let’s delve into each of these key points:
Ensure Adequate Coverage
Life is full of changes.
Maybe you’ve recently bought a new home, had a child, or started a new job.
Each of these events can significantly impact your insurance needs.
By reviewing your policies, you can ensure they still provide the coverage you need.
For example, if you’ve taken out a mortgage, you’ll want to ensure your life insurance covers this new debt.
Similarly, having a child might mean you need to increase your health insurance coverage to include their medical needs.
Ensuring Accuracy and Staying Up-To-Date
Over time, your personal circumstances will change, and your insurance policies need to reflect these changes accurately.
This might include updating your beneficiaries, adjusting coverage amounts, or even changing the type of coverage you have.
For instance, if you’ve recently married, you’ll want to add your spouse as a beneficiary on your life insurance policy.
If you’ve upgraded your home, ensure your home insurance covers the new value of your property.
Regular reviews keep your policies aligned with your current life stage.
Provide Cost Savings
Insurance premiums can be a significant expense, but reviewing your policies regularly can help you save money.
By comparing different insurance providers and policies, you might find better coverage options at lower premiums.
For instance, switching to a new insurer could offer you the same level of coverage at a reduced rate, or bundling multiple policies with one provider might give you a discount.
It’s also worth checking if you’re eligible for any loyalty discounts or other cost-saving options.
New Opportunities
Insurance companies frequently introduce new products and features.
By reviewing your insurance policies regularly, you can take advantage of these new offerings, which might provide better coverage or lower premiums.
For example, some insurers now offer policies with flexible premium payments, better coverage for critical illnesses, or additional riders that might be beneficial to you.
Keeping an eye on new developments in the insurance market ensures you’re always getting the best possible protection for your needs.
This is real and is something that happened to my mum and I.
About 25 years ago (at the time of writing), my mum bought for herself, my siblings, and I insurance policies to get ourselves covered.
Back in the day, these policies were considered competitive and good.
However, with developments in the industry, newer legislations aimed at protecting consumers, and new insurers coming to market, there were loads of changes that happened in Singapore’s insurance market.
When I got my policies reviewed for myself, I found that most of the policies purchased were unattractive and the premiums were expensive.
My entire family went for a policy review and swapped out most of our policies for newer versions, giving more coverage at a much cheaper rate.
This is why reviewing your insurance coverage periodically is essential, especially if you’re trying to lower costs!
When should you review your insurance coverage?
Here are key times when you should consider an insurance review:
If You’re Struggling to Pay for Your Insurance Premiums
This is perhaps the most significant reason to review your insurance.
Insurance should provide peace of mind, not be a financial burden.
If you find it challenging to keep up with premium payments, it’s time to re-evaluate your policies.
You might discover more affordable options or ways to adjust your coverage to better fit your budget.
A Change in Family Status or Size
Family dynamics play a crucial role in your insurance needs.
Significant changes such as:
- Having a baby
- Adopting a child
- Getting married
- Getting divorced
- Losing a family member
Each of these events requires a review of your policies to ensure adequate coverage for new family members or adjustments due to changes in family structure.
When You Experience a Financial Change
Financial changes can significantly impact your insurance needs.
This includes:
- Committing to financial loans to purchase a car
- Buying a home
- Taking out an education loan
In these situations, you’ll need to ensure your insurance policies cover your new financial obligations, protecting you and your loved ones from unexpected financial burdens.
Changes in Your Living Situation
Your living situation can also affect your insurance needs.
Consider a review if you:
- Sell a property
- Buy a property
- Renovate your home
These changes can alter the value and coverage requirements of your property insurance.
Ensuring your home insurance is up-to-date protects your investment and peace of mind.
When Your Career Changes
Career advancements or changes can impact your insurance.
If your employer provides life insurance as part of the employee benefits package, you should:
- Review your life insurance to ensure it complements or supplements your employer-provided coverage
- Consider additional policies if the provided coverage is insufficient
Professional Changes
Starting or selling a business, or significant changes within your company can necessitate a review of your insurance needs.
These include:
- Starting a business
- Selling your business
- Changes within your company
Business owners should ensure they have adequate coverage for their business liabilities, property, and employees.
Retirement and Ageing Milestones
As you approach retirement or significant ageing milestones, your insurance needs will change.
Planning for retirement involves:
- Reviewing life insurance policies to ensure they align with your retirement plans
- Considering long-term care insurance to cover potential health care needs in later years
Regular reviews during these transitions help maintain appropriate coverage, ensuring your insurance aligns with your evolving needs.
How do I conduct an insurance review?
Here’s a step-by-step guide to help you through conducting an insurance review:
1. Compile All Your Insurance Policies
Start by gathering all your insurance documents. This includes:
- Life insurance policies
- Health insurance policies
- Critical illness insurance policies
- Personal accident insurance policies
- Home and auto insurance policies
- Any other insurance coverage you have
Having all your documents in one place will make it easier to review and compare them.
If you’re using our Financial Toolkit, you can quickly determine what coverage you have from a single glance:
2. Calculate Your Current Insurance Coverage Needs
Determine how much coverage you actually need.
This depends on various factors like your income, debts, lifestyle, and future financial goals.
Use our different guides on how to calculate your insurance needs:
- How Much Life/Death Insurance Coverage Do I Really Need in Singapore
- How Much Early Critical Illness Insurance (ECI) Coverage Do You Need in Singapore?
- How Much Critical Illness Coverage Do You (Actually) Need in Singapore?
These guides provide detailed steps to help you accurately assess your insurance requirements.
Or you can use The Financial Toolkit to help you calculate how much insurance coverage you exactly need automatically based on your expenses, assets, and liabilities.
Here’s our life insurance coverage calculator:
And here are the ECI & CI coverage calculators:
This way, you don’t have to go through the hassle of manually calculating your insurance needs.
You also save money by getting covered for only what you need.
3. Identify If There Are Any Gaps in Insurance
Once you have calculated your coverage needs, compare them with your current policies.
Look for any gaps where your current insurance might fall short.
Drawing from The Financial Toolkit example:
You can see that Andy & Anna have a shortfall of $46,653 and $35,653 in critical illness insurance coverage.
They also have a shortfall of $3,304 and $28,304 respectively for ECI coverage.
This indicates that there is a gap, and that they need to get the difference covered by increasing both their ECI/CI cover.
4. Use The Financial Toolkit
Shameless plug here, but if you want to simplify steps 2 and 3, use The Financial Toolkit.
This tool calculates your coverage needs easily based on your current finances and future plans.
It helps you:
- If Coverage Is Too Low: Identify areas where you need to increase your insurance to ensure you’re sufficiently covered.
- If Coverage Is Too High: Find ways to reduce your insurance coverage, which can help lower your premiums.
- If Sufficiently Covered: Consider reducing your insurance premiums by adjusting your policies.
It’s something that I really recommend if you’re someone who wants to keep track of your entire finances and make sure you only pay for what you need, at the lowest price possible.
5. Reduce Your Insurance Premiums
Speaking of price, the next part of an insurance review is to see if there are ways to reduce your insurance premiums.
With The Financial Toolkit, you can see your total annual expenditure, derived from our budgeting feature.
CPF recommends that you spend less than 15% of your income on insurance protection.
However, many financial advisors in Singapore recommend not spending more than 10% of your income.
In this scenario, Andy and Anna collectively spend 9.9% of their income on insurance protection.
While this is still in the ideal range, what I found after running Dollar Bureau since 2019 is that you can reduce your insurance expenditure to about 5% to 7% of your income if you compare policies – provided that you’re healthy.
Here’s how to reduce them while maintaining adequate coverage:
- Talk to an Independent Financial Advisor (IFA): An IFA can represent multiple insurers and get quotes from different providers. They can help you find the best rates without compromising on coverage.
- Get Quotes from Multiple Insurers: Comparing quotes from various insurers can highlight the most cost-effective options.
- Consult Our IFA Partners: If you need assistance, Dollar Bureau partners with IFAs who are available to help you navigate through the options and find the best coverage at the lowest cost.
Conclusion
Reviewing your insurance coverage is essential to ensure you’re adequately protected without overpaying.
We’ve covered the importance of keeping your insurance up-to-date, when to conduct a review, and how to go about it.
Remember, life changes — whether it’s a new job, a growing family, or buying a home — all necessitate a fresh look at your policies.
Start by compiling all your policies and calculating your current coverage needs.
Identify any gaps and use tools like The Financial Toolkit to make this easier.
If your coverage is too low, consider increasing it.
If it’s too high, find ways to reduce it and save on premiums.
And don’t forget to consult an IFA to get the best rates from multiple insurers.
If you’re feeling a bit lost or need more personalised advice, don’t hesitate to reach out.
We’ve got a team of independent financial advisor partners ready to help you navigate your insurance needs for free.
They can answer your questions and ensure you have the best coverage for your situation.
So, take the first step towards peace of mind and financial security.
