It is a good idea to review your life cover annually to check that you are not under- or over-insured.
During this annual review it is a good idea to check how your estate would look should you die tomorrow. You should ensure that there will be sufficient cash in it to meet your liabilities so that assets like your home can be passed on to your heirs and not be sold to cover debts like estate duty.
When certain changes occur in your life, you should also review your cover to keep up with your changing family needs or changes in your circumstances.
Buying a house or apartment
If you use a home loan to buy a house or apartment, you may be expected to take out credit life insurance to cover the loan in the event that you die or become disabled.
Your home loan provider must also allow you to use an existing life policy you have to cover the loan. You may need to cede a policy on your life to the bank.
Make sure you have sufficient cover in place for the loan and your family’s needs.
Changing jobs
If you change your job, you will probably need to do a thorough review of your life and disability cover. Your income may change, affecting the amount of cover you need and your group life cover may offer you more or less life and disability cover.
A change in the nature of your job may result in your life company revising the cost of your cover. For example, if you were an engineer working on construction sites and you are promoted to a managerial position in which you spend much less time on site, your risk will reduce.
If your new job takes you to a new country or requires you to travel extensively, especially to countries regarded as high risk, you should inform your life insurer as your risk will increase. Don’t try to hide facts like this because if they come to light only when your family claims on a policy, you risk the claim being denied.
Remember when leaving a job that offered good group life benefits for self-employment or one with no benefits, you may be able to convert the group cover into individual cover in your own name as a conversion benefit or continuation cover.
Getting married
Getting married and/or moving in with a partner may be a time to reconsider your life cover. You may want to take out cover to settle the debt on your home and/or provide your partner with an income should you die or become disabled.
Don’t forget to add your spouse/partner as a beneficiary on your policy.
Your group life cover is updated
It is easy to dial out of those emails from your employer or your retirement fund, but try to look out for changes to your group life and disability benefits. This cover is typically cheaper than what you can take out as an individual. Read more What is group life cover
So, if you see an offer to take up more group life, check it out or ask your adviser to help you to do so.
Also watch out for decreases in cover – this may happen when the insurer for your group scheme increases premiums. Your employer may then choose to reduce your cover rather than increasing its contributions to your retirement fund – or keeping them the same, with the result that the percentage spent on retirement savings reduces.
Birth of a child
With each child, the number of people who depend on you financially increases. Your life cover and disability cover should increase accordingly to provide for their ongoing living expenses and the future costs of education.
You take up an extreme sport
Your life cover is based on the risk your lifestyle presents to an insurer. If, after taking out your policy, you take up flying, hang gliding, free diving or any other extreme sport, check your policy to see if you need to inform the life insurer.
Change in smoker status
If you manage to kick the habit and not smoke for a year, ask your insurer to review your premiums as they may become substantially cheaper.
If you take out life or disability insurance as a non-smoker and subsequently take up the habit, your policy may require you to inform the life insurer.
Failure to do so may result in a reduced or declined claim.
Remember that an insurer can insist on smoking tests which measure the level of cotinine present in your body, so declare your habit even if it is an occasional one.
You get divorced
This may be a time you want to reduce the cover you have in place to provide for a spouse or to keep it in place should you have children who will be cared for by that spouse.
Remember to review the beneficiaries nominated on the policy – if you don’t remove an ex-spouse, he or she will still receive the benefits of your policy on your death.
You pay off your debt
If you are one of the lucky few with extra capital and you pay off your car or home loan, consider reducing the cover you have in place to settle that debt. This is just one of many benefits of paying off debt and you can better channel the saving on premiums to saving for long-term goals such as your retirement.
Following a death in the family
A death in the family could trigger changes to your life and disability cover if it changes your circumstances. If a family member you previously supported financially dies, it may make financial sense to reduce your cover.
If you inherit money as a result of a family death, enabling you to settle debts and bolster your savings, your life and disability needs could also change.
If the family member who dies was a beneficiary on your policy, you will need to update your beneficiary nominations.
You retire
This is another good opportunity to have a look at the cover that you have in place, and whether you'll need as much once you're no longer working and earning an active income.
You may find that you can reduce the amount of life cover that you have.
If your life policy has such a feature, you may also be able to convert your disability cover into different cover, such as that for severe illness, which could be more appropriate once you have stopped working.
