Are you underinsured or over insured? Quite possibly, both.

By Tuesday, September 1, 2015 0 No tags Permalink 5

Every year, I look forward to the end of winter. The sun rising earlier, the days getting longer, and no longer having to wear a couple of layers of clothes to keep warm.

Yes, I do live in Queensland and we don’t really have a winter, but having lived here all my life, once the temperature dips below about 10C, I start to look for snow, beanies and gloves which become standard attire early in the morning…….yes, I know I am soft!

The transition from winter to spring also presents a great opportunity to do a bit of spring cleaning of your own financial position. In the last month I have been prompted to do this by two very important pieces of information I have received.

One is my payment summary or group certificate for the financial year. All very scary, as it prompts me to think very carefully about my spending habits. Where did I spend all that money?

The second important piece of information that I receive is my superannuation statement and, for me, this is extremely important. As I have mentioned previously, I am 59 and I would like my superannuation balance to be my retirement safety net, not the age pension.

The investment returns on my fund up to 30th June have been quite good, the level of contributions have been reasonable, but the costs associated with my life insurance cover in super are a concern.

Do I really need to have this much insurance inside my superannuation if I also have insurance outside superannuation?

My insurance was very important, especially after we borrowed a large sum of money to buy our current house. The question I now ask is do I still need this level of coverage when the debt on the house is small and the cost of the insurance is impacting on the further growth in my superannuation balance?

My knee jerk reaction was no. I need to reduce my coverage, especially inside super, as the reduced premium cost will certainly help with the future growth of my superannuation. Surely, I don’t need as much Life or TPD, do I?

However, upon further review, I noticed that the largest premium was for my Income Protection insurance, and worryingly, that policy only covered me for two years, at a fraction of my current wage with a waiting period of only 30 days.

Do I need to increase the benefit payment period to age 65? Should I increase the monthly benefit to a more realistic level, and could I increase the waiting period to either 90 or 120 days? I have enough accrued leave to cover this period of time.

Most importantly, do I feel comfortable about making any of these decisions on my own? No! I may be an expert on Social Security, DVA and Aged Care, but I am not an expert on insurance.

Am I underinsured or over insured? Quite possibly I am both, I need to talk to someone to make sure that I have considered all the options and all the scenarios.

As I have often written in my blogs, don’t rely on your neighbors for advice. Talk to an expert and then make a decision once you have all the necessary correct information.

Our resident insurance expert, National Risk Manager, David Spiteri, will respond on this blog with his advice on my situation . Until then, I’ll sit tight.

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