Five reasons you should review your protection policies regularly

Good financial planning is an essential aspect of achieving long-term financial goals. It involves developing a comprehensive strategy that considers all financial aspects, including investments, savings, protection, and retirement planning.

Having a sound financial plan can provide a sense of security, reduce financial stress, and help you make informed financial decisions. However, creating a financial plan is only half the battle.

Regularly reviewing and updating the plan is equally important to ensure that it remains aligned with changing financial circumstances, goals, and market conditions. By regularly reviewing your plan, you can make any necessary adjustments to ensure that your financial plan continues to provide the desired outcomes. In this way, financial planning and reviewing can help you achieve you financial goals, prepare for unexpected events, and attain financial security.

Yet, every long-term financial plan relies on your your ability to earn an income during your working life. To build a future income for your retirement, you will need to save, and in order to be able to save, you need an income. When you have dependants, loss of your current income will also heavily impact your financial future.

Here are five reasons why regularly reviewing your protection needs is equally important as reviewing your investment and pension plan.

1. Life events: Life is dynamic, and circumstances can change over time. Your protection needs may vary and change over time as you experience milestones such as marriage, having children, or buying a home. Regular reviews with your financial advisor or brokers can help you assess if the existing protection plan you have adequately covers these new circumstances. Benefits such as guaranteed insurability options and protection continuation options can help you adjust your cover in line with the increased protection need that arises from certain life events. Adjustments can be made to ensure your loved ones are protected.
2. Professional events: You may change your occupation or become self-employed. These events will inevitably impact your exposure to financial risk. Additionally, your income levels may change due to career advancements, job changes, or business developments. Regular reviews help you assess if your current protection plan provides adequate income protection in the event of disability or loss of income.
3. Policy updates and enhancements: Insurance policies may undergo updates and enhancements over time. Regular reviews provide an opportunity for you to see any policy changes, new coverage options, or improvements in insurance products that may better meet your protection needs.
4. Financial education: Regular reviews provide an opportunity to learn more about the importance of protecting your financial plan. This helps you stay informed and actively participate in your financial planning process.
5. Financial peace of mind: Regularly reviewing protection needs gives you peace of mind, knowing that your financial well-being is being regularly assessed and protected. It helps ensure that you have the right level of coverage to mitigate financial risks and protect you and your family.

In summary, reviewing your protection needs on a regular basis ensures that you protection cover aligns with your changing circumstances, evolving risks, and provides adequate financial protection. It helps you stay prepared for unexpected events and provides you with the reassurance that your financial resilience is being actively managed.

A case study - meet John and Sarah*.

A few years ago, they were a young couple buying their first home. They decided to take out a mortgage protection policy with serious illness cover to ensure that if anything happened to either of them, the other would not be left struggling with mortgage repayments. At that time, their main concern was their new home, and mortgage protection seemed like the most sensible choice.

Fast forward to the present day, John and Sarah are parents to two young children. Sarah recently received a promotion at work, leading to a significant increase in her income. These changes in their circumstances have increased their financial responsibilities – they now have their children's future to consider, and their lifestyle has improved with Sarah's increased income.

If John or Sarah were to pass away unexpectedly or become critically ill, the mortgage cover they initially took out would cover the remaining mortgage repayments, but what about the other expenses?

Their current lifestyle, the cost of raising their children, and potential future education fees would not be covered by the mortgage protection alone.  John and Sarah need to ensure that they remain financially resilient when unforeseen life events occur.

First, they need to protect their future income. They need to review whether their income is sufficiently protected if they are unable to work due to injury or illness. An income protection policy will ensure that John and Sarah can still pay off their mortgage if they lose their ability to work.

They may also consider taking additional life cover or serious illness cover. By reviewing their insurance cover, John and Sarah can adapt their insurance policies to their changing needs, ensuring that they continue to provide the best possible protection for their family.

*John and Sarah are fictional characters. Any similarity to actual persons, living or dead, or actual events, is purely coincidental.