I think the common consensus is that insurance is something we don't like paying for (myself included) but we need to. Partly because most people feel 'poorer' after meeting a financial advisor, most adopt the attitude of getting the necessary over and done with so that they don't need to see the person again.
Just recently, one of my clients told me that her spouse is totally not interested in financial planning and he bought his protection policy just to get this need out of the way. In fact, this behavior is so deeply ingrained when I tried to gather feedback from clients on how to better service them, most people have no clue as their expectation bar is set really low.
If you adopt the buy and forget mentality, chances are you won't be reviewing your policies for many years. I need to tell you though that policy review matters. Here are 3 reasons why.
1. Your Life Stage Will Change
You may be single at the point of purchase but you might be married with kids now. Some of my single clients are only keen on critical illness coverage, however all of my married clients are concern about life protection because they want to look after their kids if anything unfortunate happens to them. Also, you can't be earning the same wage all the time. If you bought your policies when you were still a fresh graduate, the amount of income you needed to protect would have been vastly different from the income you need to protect as a middle management. The last thing you want is for some critical illness to happen and you realise that you got a payout that only covers half your new income or requires you to get back to work sooner than expected.
This is why a regular policy review matters. The financial advisors job is to highlight these gaps over the course of working with you. If most of your financial planning is done on a transactional and ad-hoc manner, it's like constantly changing doctors and you might get a mis-diagnosis due to a lack of information.
2. There might be better policies out there
Depending on when you got your protection plans, some of the older plans might be really disadvantageous compared to the new ones in a similar category. For instance, one of my client's parent bought her a life plan that covers her for $50,000 and she's required to pay for the plan for a lifetime. Current plans have a limited pay option that basically frees you of financial commitments once you reach retirement age. On top of that, the critical illness rider attached only covers for advance stage critical illnesses. Modern plans may include early stage cover. On top of which, old critical illness plans may cover for only 30 critical illness instead of the 37 covered today. Above all, old plans might be much more expensive for the coverage given. You either get less benefits or per dollar of sum assured may cost much more.
In recent years, insurers have become more competitive. There are also promotions on the plans from time to time which might offer lifetime discounts on the premiums. I recall the first time I came across a multiple paying critical illness plan. I was pleasantly surprised that the premiums were actually cheaper than a single pay early stage critical illness plan of another insurer. So my client got more coverage and paid less as a result. As plans will continue to evolve over time, a consumer is unlikely to realise the difference unless they review their policy. I don't think most people stay on top of insurance news on a day to day basis.
3. Chances are you have financial shortfalls you were supposed to fill gradually but you conveniently choose to ignore/forget
9/10 clients I meet cannot fully complete their financial planning in one setting. There are many of them who expected to complete it in one session though. Many are often surprise, "oh you mean saving $300/month is not enough for my retirement?" Yes we don't spend $300/month now, how can saving this amount per month be sufficient to retire even with the power of compounding? In fact, not everyone may even start their retirement planning on the first setting if they are doing financial planning for the first time. More often than not, they would have maxed out their budget once they complete their protection planning. Some may not even have enough budget to completely plan for their protection needs in one setting. This is why financial planning is an on-going process.
I mean if we think about this sensibly, we don't expect to complete saving up for retirement in our first year of work right? Then how is it possible that we can do up all our planning needs in one go? Of course, there are exceptions. It also depends on what life stage client is at when they meet me. Someone in their 50s is expected to have the resources to settle their retirement needs in one setting or at least as close as possible because they have little time left. Most of the time though, the advisor grows with the client because the client's finances is expected to grow overtime. This is the most important reason why policy reviews are so essential. You need to put resources in place to fulfill your own goals!
Summary
In short, doing policy review is a really important part of financial planning. Life will not remain nice and rosy if something unexpected comes and disrupt your life. Just think of COVID-19 and how it has disrupted some peoples' livelihoods. If they have no emergency funds, their lifestyles will be vastly affected. Policy reviews are meant to help you achieve the following:
Ensuring that your plans stay relevant to your current life stages
Ensure that your plans are kept up-to-date and that you do not overpay for too little coverage
Ensure that you remain on-track to meet life goals
If you want to do a policy review, do speak with a trusted advisor. Alternatively, you can drop me a message if you would like me to help you with it.
Be sure to share the article if you feel this information is helpful. You will enable a lot more people to learn about the importance of policy review. Like my page if you would like to read more of such articles.
Disclaimer: The content created are based on my personal opinions and may not be representative to everyone or any organisation. If you have any doubts or queries pertaining to insurance or investment, please seek professional advice from a trusted adviser in an official setting. You may also reach out to me if you do not have a present adviser using the message box under 'Let's Talk'.
Commentaires