Reviewing Your Life Insurance as Your Life Changes

Published: August 28, 2019

It's great that you have some form of life insurance to protect you and your loved ones should you pass away or be unable to work due to an illness or injury. However, your policy may no longer meet your requirements.

The changes you experience year-to-year can trigger the need to update your insurance coverages. Make sure you and your loved ones are financially protected at this new phase of your life. Review and update your policy type, cover amount and nominated beneficiaries.

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How often should you review your life insurance policy?

Your policy generally requires an update after any major life event, for example, buying a home, starting a family or retiring. It might be worth reviewing your insurance annually to check and make sure it still provides you with value at your current stage of life.

What to consider when reviewing your insurance

1

Cover amount: Your sum insured

You might need to increase your cover amount if your income is higher or you have increased financial responsibilities, for example, a family and mortgage. On the other hand, you might want to consider decreasing your cover if you’ve paid off your mortgage and debts and your children are financially independent.

Make sure to calculate how much life insurance need after every significant life event.

2

Type of policy

Depending on your family dynamic and financial circumstances, you could require a different policy type:

  • Term life insurance: Pays your nominated beneficiaries a lump sum death benefit when you pass away or get diagnosed with a terminal illness.
  • Trauma insurance: Provides you with a once of payment if you get diagnosed with one of the critical illness listed in your product disclosure statement (PDS).
  • TPD cover: You receive a lump sum benefit if you are totally and permanent disablement, because of an accident or sickness, and can no longer work in your own or any occupation.
  • Income Protection: Get a monthly benefit, up to 75% of your before-tax income, when you're unable to work for longer than your waiting period because you got ill or injured.
  • Funeral insurance: Designed to cover the cost of your burial expenses; usually a payout between $3,000 and $15,000.
3

Affordability

If your current policy is on stepped premiums, you'll have noticed that you're paying more and more every year. You might want to consider a level premium style policy that starts more expensive but doesn't increase because of your age. Learn more about how you can find cheaper life insurance in Australia. Also, if you quit smoking at least 12 months ago, your insurer will generally consider you a non-smoker and offer your cheaper rates.

4

Policy ownership

The person that owns your insurance policy is the only one that can make changes to it, for example, increase or decrease cover. Review your current life insurance policy ownership structure to determine if it meets the requirement of this new stage of life.

5

Beneficiaries

If you recently gotten married, divorced or started your family, it’s a good time to update who gets your life insurance payout when you die.

Find a policy that meets your changing requirements

7 Life stages that affect your insurance needs

Your insurance needs change at different stages of your life. If you have experienced any of the big life changes listed below, make sure your life insurance can cover your financial responsibilities.

wedding-rings

Marriage

Whether you’re getting married or moving in together, your financial circumstances will become very different. As a two- or one-income household you'll need to calculate how much money each of you would need should the other pass away. You may also want to consider updating your beneficiary to your new spouse.

house

Buying a home

Paying a mortgage is a big responsibility and one you’ll need to continue, even if you’re unable to work. The monthly benefit from an income protection policy might help you cover your home loan. However, make sure your income protection is enough to at least cover your daily expenses and mortgage or up to 75% of your income.

If your home needs modifications because you're totally and permanently disabled, a TPD insurance policy might be more beneficial.

If you want your partner and/or children to be able to remain in their home, make sure your death cover will be enough to pay off your mortgage.

kids

Having kids (or other dependents)

If you’re starting or growing your family, you will soon have more financial pressures. Ask yourself whether your insurance payout will be enough to provide for your kids’ future, including their educational aspirations. You might want to search for a life insurance policy that includes child cover.

Similarly, if you’re taking care of an elderly parent or grandparent, you might want to increase your insurance coverage to help support them should you not be alive to do so.

divorce-01

Divorce

If you have a life insurance policy listing your ex-partner as your beneficiary, you might want to update those details. However, if your divorce requires you to pay child support, you may want to keep your ex as the beneficiary. 

After splitting from your spouse, your financial situation might look different. Review your policy to determine if it still reflects your current needs.

For example, if you receive child support from your ex and they pass away, that child support payments will stop. You might want to consider taking out a life insurance policy on your ex-partner, where you are the policy owner and listed as the beneficiary (the person receiving the death benefit if your ex-spouse dies). Remember, you will need your ex-partner's consent. 

wreath

Loss of a loved one

When a spouse or partner passes away, you’ll need to revaluate your sum insured. You might need to decrease or increase coverage depending on how much of your partner contributed toward the household. Their contribution could be either income-based or in maintaining the house and taking care of the children. Ask your insurance broker to assist you with the evaluation process and possibly in claiming from your partner's insurance and cancelling their policy.

interview

Career change

If you've previously had group insurance through your former employer, you might need a new life insurance policy. Contact your superannuation fund to check.

If you’ve changed jobs and your income has increased, you might want to update your income protection policy to ensure it covers 75% of your new salary.

grandparents

Getting older

Life insurance for seniors over 65 requires careful consideration. As you're getting older, you might not need as much life insurance, especially if your kids are grown. If you're a pensioner, you typically no longer require income protection or TPD insurance.

If you want to leave a legacy for your beneficiaries, you might still want some level of life insurance. But if you only need your final expenses covered, then a funeral policy might be enough.

Benefits of a yearly life insurance review

You're not always fortunate enough to know when significant life changes are coming. However, reviewing and updating your life insurance could help protect you and your loved ones from the unexpected, like becoming disabled or being diagnosed with a terminal illness.

By reviewing your policies yearly, you could help guarantee your beneficiaries are always covered and keep your premiums affordable.

Frequently asked questions and answers

Where can you find your policy documentation?

Contact your insurance provider and request that they send you your latest policy documents and a summary of each policy type you have. You can also visit the company's website and download their product disclosure statement (PDS).

Can you change your life insurance policy?

To make changes to your current policy, you generally need to call your provider's customer care number. Be sure to have your policy number ready. If you only need to update your personal details, for example, your address, then you might be able to do so online via the company's website.

How do you change life insurance providers?

If you’ve compared quotes and found a provider that better meets your requirements, you can take out new coverage from them. Make sure your new policy is active before cancelling your old plan.

Request a review of your life insurance policy

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