Pre-exisitng conditions
Help! My insurance premiums keep getting more expensive!
Almost all of us all know why we need insurance. Insurance gives us the peace of mind to know that the “worst case” scenarios and the “what if” moments are covered. So why do insurance premiums keep increasing – and what can be done to reduce premiums?
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Why are my insurance premiums so expensive?

The one thing that we ALL do is get older. Consequently the cost of things like insurance increases. This increase in premium is directly related to the increased likelihood that the insurance company will have to pay out on your policy. Ageing generally means there is an increased likelihood of illness and injury, a greater chance of car accidents and, rather morosely, we are getting closer to passing away. Therefore it makes sense that the insurance companies increase their premiums to cover their increased risk. Often, as a result, many people cancel insurances because the premiums are perceived to be too high. Yet the irony is that the older you get the more you need your insurance!

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A real-life example

Consider John and Jane Doe.

John is Male, 25, with an office job and he will pay about $1.60 a week for $100,000 of life cover.
Jane is Female, 25, in the same job but will only pay about $1.00 a week for the same cover.

At 65 Jane would be paying $23.50 a week for the same amount of cover and John would be paying about $36.50 a week. By the time they are 80 years old, it would probably be costing him around $200 a week and her $140 a week. In other words, the insurance premiums would almost definitely be much more than the average 80-year-old fixed income couple could afford.

 

As we often say here at Cover Yours be wary because what the headline gives the fine print takes away.  As a result it pays to have a handy insurance specialist in your corner!

(Check out our blog on Advisers vs Online for some more insights into the challenges).

 

 

What can be done?

Insurance should be part of a lifelong financial plan,  yet too many people look at it as a short-term minor inconvenience. Like many things in life the earlier you get on to managing your premiums the better the outcome as a result. Firstly ask your insurance adviser to review your insurance. They will work with you to consider the following questions:

  • Are you over insured? How much insurance should I need at each stage of life?
  • What insurance amount is necessary long-term for funeral expenses, a legacy for kids/grandkids?
  • Is there an amount that is needed for medium term?
  • What can be self-insured? Can you sell properties if skint? Will you cut back on expenses? Maybe you can downsize?
  • What budget do you feel is acceptable? Do you really need your $150,000 a year if the mortgage is paid and partner is working?
  • Is maintaining your lifestyle important? Can the car be downsized? Are the two foreign holidays necessary? Can you live on less?
  • Do you have access to work insurance policies?

Once they have the answers to those questions they can put together a few scenarios for you to consider. It might be better to pay a few dollars a month more today to save $100’s of dollars a month a few years down the road.

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There is hope!

Let’s assume that our heroes John and Jane were smart enough to understand they would need that $100,000 when they were 80 and picked a level term policy at age 25. This means that they pay a little more in the early stages than they would on a standard policy but look at how it impacts them later on:

Jane would be paying around $2.80 a week and John would be paying about $4.50 a week for $100,000 of Life Cover. Even at the age of 80.

Firstly what a massive saving over the life of the policy!  Also, and more importantly, look at the difference between the insurance premiums at age 80 in our previous example!!

If you think that $4.50  can’t buy a cup of coffee in Wellington today just think how irrelevant that amount will be in 55 years’ time!

What now?

Review your insurance!f you don’t know what you have now you won’t know the potential impact for the future. Contact an insurance adviser now for a review and get on top of your insurance premiums. Make sure they are affordable in the future by managing them now. Just in case the “what if” becomes an actual event.

 

Get in touch now to talk through your options by calling 0800 COVER YOURS or filling out the form below.  No obligation – just straightforward advice. If you are based in Kapiti or Wellington (or are passing through) we may even be able to meet face to face to talk through your options. That’s not an offer you’ll get from online providers!

Marc Hamilton REGISTERED FINANCIAL ADVISER

Marc Hamilton
Principal Adviser/Director

REGISTERED FINANCIAL ADVISER

P: 0800 COVER YOURS (0800 268 379) M: 022 040 7117
www.coveryours.co.nz

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