Many would agree that the impacts of COVID-19 remind us of what is most important in our lives: family, friends, the opportunity to work and the freedom to travel. And while it is understandable that the impact of the pandemic on your financial situation is preoccupying your thoughts at this moment, we encourage you to manage your financial affairs in the context of what you really want, now and importantly in the future.
This includes remembering that what matters most is protecting yourself and your family from the type of unexpected events that happen every day – motor vehicle accidents, serious illnesses, cancer and heart attack.
Contrary to the raft of misinformation that might be circulating, now is not the time to cancel your personal insurances to reduce your personal expenditure. Doing so could prove to be your most expensive mistake yet. To find out why and to consider other options for reducing costs, please read more.
At Stratus, we believe that our role as your financial adviser is to offer a calm voice of reason and reassurance as we help you maintain focus on the broader perspective, beyond COVID-19, when it comes to your financial goals.
Cancelling a personal insurance policy – Life, Trauma, TPD, Income Protection – could have serious consequences resulting in significant financial hardship should an unexpected life changing event occur during the time of cancelled cover. And should you later wish to ‘reinstate’ your insurance, it’s not as simple as just turning it back on.
The application process would begin again for any new policy. The process would consider your age, any recent changes to your health or medical history and other circumstances. Taken together, the risk factors of your age, health and circumstances, along with general insurance cost increases, may result in higher premium prices and fewer policy benefits.
If affordability is an issue, due to COVID-19 or at any other time, it’s important to talk to your financial planner or insurance adviser about options that may be available to you.
For example, you may have the option of temporarily suspending your personal insurance, also known as a ‘premium holiday’, ‘premium pause’ or ‘insurance holiday’.
The provisions around suspending your insurance cover vary between different insurers and policies. Some may require evidence of financial hardship while others may allow unconditional suspension of cover. Similarly, some insurers may allow you to suspend cover for a full year while others may allow a shorter period of a specific number of months. There may be other terms and conditions including the opportunity for only one premium suspension over the lifespan of the policy.
It is important to understand that suspending your cover typically means losing all your cover for the suspension period. That is, you will be unable to make a claim while your cover is suspended. Following the suspension, your policy will then continue with the same terms, conditions and level of cover as before.
It may be appropriate to reduce your insurance costs in other ways for example by changing your premium structure, reducing or amending the benefits associated with your policy or reducing your cover. While there are downsides to switching policies, this may be worth considering. Insurance companies are extremely competitive, and new products that include enhanced benefits and/or lower premiums while offering equivalent and sometimes greater value for money can become available.
Is it Time to Review your Personal Insurances?
Whether your circumstances have changed as a result of COVID-19 or for any other reason now and in the future, it is important to discuss these changes with your financial professional. The goal of your insurance review is to match your circumstances with the most appropriate policies for your needs and to achieve affordable premiums.
Special Note on Income Protection
If you have existing Income Protection insurance, there may be significant value in holding on to this cover. Insurance companies regularly review contract terms, definitions and pricing in light of claims history and other factors. It is likely the range and level of benefits available under new Income Protection policies in the future may reduce. This has already started to happen. An example of a recent change in the market is that new ‘agreed value’ Income Protection policies are no longer available in Australia (note, existing policies are not affected). If you want to consider taking out Income Protection cover, seek advice now to take advantage of quality cover that may still be available before possible future changes.
Please remember that we are here to help in whatever way we can. If you would like to talk further about this article, or about your financial affairs more generally, please don’t hesitate to get in touch.
Please don’t hesitate to contact us if you have any questions or concerns. Please contact Brett, Steve or James by calling +61 (0)7 3007 2007 or emailing firstname.lastname@example.org
Stratus Financial Group helps families, professionals, executives, business owners and retirees manage their complex financial affairs and coordinate their professional advisers.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This is general advice only and does not take into account your objectives, financial situation or needs, so you should consider whether the advice is relevant to your personal circumstances. You should also read the relevant Product Disclosure Statements (PDS) before making any financial decisions.