Avoid making simple, but devastating, insurance mistakes
Fri Jan. 1st 2021
Jane has not had an insurance review for over three years. Every year, the insurance adviser Jane works with, sends her a renewal notice, which she scans briefly. Her payments keep coming out on automatic payment and Jane congratulates herself on keeping her life & personal insurance in check.
Secure in the knowledge that if anything bad should happen, her insurance will put her back in the same position she enjoyed before the unfortunate circumstances occurred.
At least that’s how it was… until unfortunate circumstances actually did occur.
The Bad News
Up until about a year ago, Jane and her husband, Dave, were both employed. More recently, though, Jane became the sole source of income for her family when Dave fell victim to downsizing at his work. She wasn’t overly worried though, as her job as an emergency room paediatrician brought in a good salary. She thought if anything should happen to her, there’d be no danger of Dave and the kids (four-year-old Michael and seven-year-old Shawn) losing the family home, since her life insurance was enough to cover the mortgage, pay for her funeral and leave some money for her family.
Jane had planned for her death. What she hadn’t planned for, though, was continuing to live, under very different circumstances.
One rainy night, while driving home exhausted from a double shift, Jane fell asleep at the wheel. She doesn’t remember the accident that took her through a guardrail and over an embankment, and changed her life forever. She remembers regaining consciousness in the same emergency room where she worked, unable to feel her legs.
Jane will never walk again, and may never work again. Sometimes she feels that her family would be better off if she had died.
More Bad news
Jane was carrying only term life insurance, with no provision for disability, not to mention income protection. When her circumstances changed and she became the sole source of support for her family, the mere possibility of her ever being unable to work should have sent her rushing to her insurance adviser for a review.
For that matter, her adviser should have been contacting her regularly to find out if anything significant in her life had changed. Most life insurance policies will allow you to add disability insurance, so that you’re covered if you become seriously ill or injured.
Jane will need medical support for the rest of her life. Dave has found employment, but he and Jane were forced to sell the home they loved and move to a small apartment. They struggle every day to cover the cost of Jane’s long-term care.
Annual insurance reviews are vital
In the same way that you have an annual doctor’s check-up to ensure that you remain healthy, you have to look after the state of your insurance as well. Once you need to make a claim, it’s too late to adjust your cover.
As insurance advisers, we ask our customers to have a review every one to two years. The cover you needed when you first took out your insurance policy may be very different from the cover you need today. By taking as little as 15 minutes, you can see if it is still the right cover for you. What does it all mean?
Should Jane have had an insurance review? The answer is yes.
Your insurance needs to change any time something changes in your life such as:
- You have had a child
- You get married or divorced
- Your employment or household income changes significantly.
Start with a quick 15-minute call with your adviser to see if an appointment is needed. The old adage of “hope for the best, plan for the worst” never rings more true. No one wants to end up like Jane.