By Andrew Davies — Director and Insurance Adviser, Tidal Life & Health Insurance
For most people, their personal and business insurance plans were arranged at a logical point in time such as starting a business, buying a home, taking on debt, or growing a family. The challenge is that life and business do not stand still. Over time, changes such as business growth, increased personal or business debt, career progression, or family commitments can materially alter the level and type of risk you carry.
If insurance is not regularly reviewed, cover can quietly fall short, leaving gaps that only become apparent at claim time. Equally, policies can continue insuring risks that no longer exist, resulting in unnecessary premiums and inefficient use of cashflow.
In many cases, the issue is not that insurance was poorly arranged at commencement, but that it was never revisited. This “Set and forget” mentality is unfortunately a common occurrence.
Regular reviews through a financial adviser will help ensure your cover continues to reflect your current reality, risks and preferences, rather than being based on decisions made years earlier under very different circumstances.
In practice, this misalignment usually shows up in one of three ways: – Being underinsured when you need financial support the most. – Over insurance and paying for cover you no longer require. – Outdated policy structures and/or ownership that no longer reflect your personal or business situation.
The risk of under or overinsurance
Underinsurance is often only discovered at claim time, when it is too late to fix. If illness, injury, or death occurs and cover is insufficient, the financial consequences can be significant. For business owners, this can mean pressure on cashflow, difficulty servicing debt, or challenges maintaining business continuity.
Overinsurance, while less visible, is also costly. Premiums will be spent covering risks that no longer exist, or cover is at levels that exceed what is realistically required.
Outdated policy structures that were appropriate years ago may no longer provide the certainty or functionality required today. Keeping policy ownership aligned to the intended beneficiaries is an essential step. Triggers such as marriage, divorce, or changes of Trustees or shareholders are likely to all require a review of ownership.
What to consider during an insurance review
Changes to income — Pay rises, promotions, career changes, starting a new business, or moving from dual to single income all impact how much cover is appropriate.
Changes to debt and financial risk — New loans, increased lending, personal guarantees, or new business ventures introduce risks that existing policies may not have been designed to address.
Changes to your family situation — Marriage, separation, or the arrival of children can significantly alter financial responsibilities and dependency.
Changes to your health & claims — Keeping your adviser updated on any major illness diagnosis, surgeries, injuries or extended periods off work will ensure you don’t miss a chance to claim on your policy.
Health insurance excess levels — With health insurance premiums rising due to increasing healthcare costs, adjusting the excess will manage affordability while maintaining meaningful cover.
Keeping insurance aligned with reality
Insurance works best when it reflects your current circumstances, not your past decisions. Speaking with your adviser regularly and reviewing your cover as your life and business evolve will make a meaningful difference when it matters most.
This article is general commentary only and does not constitute personalised financial advice. Andrew Davies — Director & Financial Adviser, Tidal Life & Health Insurance. www.tidalfs.co.nz
