One of the biggest misconceptions about protection, including critical illness cover, is that once you have taken out a policy, you’re set for life and it never needs to be reviewed. However, this isn’t true and there are many reasons why you should regularly review your levels of protection, here are just a few:
The eroding power of inflation
Your coverage amount – known as Sum Assured in insurance terms – that you bought years ago may now no longer be enough, thanks to the rising cost of living. At just 2.5% inflation, you would lose nearly half of your purchasing power over 25 years. So, $10,000 today would only have the purchasing power of $5,394 in 25 years’ time.
As you move through different life stages such as getting married and having children, the number of people who are financially dependent on you will also change. Naturally, the amount of coverage needed would increase with the number of dependants you have. Think about what would happen if they were left with an unpaid mortgage, education fees and their daily expenses, if you were no longer able to provide for them.
As your income level rises, you should increase the amount of coverage you have to match your higher net worth and more expensive lifestyle. This will protect you and your loved ones against any potential (and uncomfortable) downgrading of lifestyle, if you’re not able to provide for them.
Reviewing your overall level of protection is an integral part of your financial plan. Please get in touch if there has been a change in your personal circumstances that may have an impact on the amount of protection you need.
If you would like to arrange a complimentary consultation to discuss your financial planning needs, visit www.aam-advisory.com or call 6653 6652.
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