Why do my insurance premiums keep going up? What can I do about it?
The premiums increase for 2 reasons …
1. As you get a year older, you are deemed to be a greater risk to the insurer and more likely to claim. The premiums are the price you pay to cover the risk – therefore if the risk increases, so too does the premium.
The level of risk increases at a greater rate as we get into our mid-forties and therefore the premiums increase at a greater rate from your mid-forties than they did when you were in your thirties.
The good news is – you got to have another birthday!
Below is Dr. Seuss’s take on birthdays – it’s all good!
[ezcol_1half id=”” class=”” style=””]”If we didn’t have birthdays,
you wouldn’t be you.
If you’d never been born,
well then what would you do?
If you’d never been born, well then what would you be?
… Or worse than all that…[/ezcol_1half] [ezcol_1half_end id=”” class=”” style=””]Why, you might be a WASN’T!
A Wasn’t has no fun at all.
No, he doesn’t. A Wasn’t just isn’t. He just
isn’t present. But you…
You ARE YOU!
And, now isn’t that pleasant!”[/ezcol_1half_end]
2. Most insurance benefits such as trauma cover, life insurance or income protection cover are linked to inflation – this means if inflation is running at 3% then the benefit will increase by 3% on the policies anniversary. If for example, you set the policy up with a benefit of $500,000 and inflation was 3%, then the benefit will increase to $515,000.
The good news here is that the benefit retains the same purchasing power – your family can continue with their current standard of living.
What can I do about it … ?
Firstly, the level of cover you require needs to be continually assessed. An ideal time is when you meet with your adviser to review your covers. If the mortgage has decreased, your KiwiSaver balances have grown and the kids have left home, you may need to consider how much cover you really need? Another key change that I see with a number of families is that the earning capacity of both spouses may be on a level footing as the wife or husband has returned to the workforce as the children have got older, and therefore the need for a passive income in the event of one passing away is not so great – again this is something that can be discussed at review time.
Secondly, you do have the option to put in place level premiums which means they will stay the same for a nominated period of time – 10 years, to age 65 or to age 80 – it depends on the provider that you choose to go with. This may be an option for you?
Thirdly – putting in place an excess on your health insurance will save you money each month BUT you need to be aware of how the company treats excesses – again happy to look at this option for you.
Finally – insurance companies are continually reviewing their policies and premiums – your plan may in fact be overpriced and/or the policy wordings outdated. It may be a good time to get it reviewed in line with your current circumstances and current market offerings.
If any of these scenarios apply to you and your family, give me a call – I am happy to have a chat with you.