How often do you audit your policies? It’s imperative, and critical, that you do!
A Punchy Headline
In the interest of you and your family, it’s essential that you conduct a major audit of your policies every 5 years. It helps you reassess and realign the safety net that you provide your loved ones.
Be it as a business owner or a professional, auditing plays a crucial role in your lives. It helps you keep track of critical factors and also helps you in being agile and changing course to be on top of your business. However, do you audit one of the most important aspects that has huge ramifications for you and your family… Your policies? Very few of you will be able to say yes to this question straightaway.
It can be said that life Insurance policies are very rarely bought, instead they’re mostly sold to the potential buyer. And, therein lies the inherent problem. It’s very important to understand that policies bought without assessing the important elements is simply a waste of investment. How many of us know or care to make ourselves aware of the hidden aspects of the policy like specific charges, risk cover, in ULIP plans allocation between equity and debt… If you’re serious about your money and about your coverages, all this and much more should be verified by you both on your on-going policies and before you invest in your next policy.
Look back at your insurance journey, and you’ll realise that many of us have been paying premium for our many insurance policies without realising the finer points or gains that we could have attained. Come to think of it, many of us would have picked up policies recommended by a friend or a relative, without at all getting into the merits or aligning them to our financial journey.
To begin with, it’s important to understand that largely there are three types of insurance policies: traditional plans, market-linked plans and term plans.
Traditional plans offer you fixed terms for premium payment and repayment. The sum assured is fixed according to the premium being charged based on the age of the life assured. The policy guarantees death/maturity benefits with additional bonuses. Higher the tenure, higher the maturity amount as the bonus rates are high with longer maturity.
Market-linked plans or ULIPs as they’re generally referred to are financial products which bring together features of both insurance and investment. The sum you align to these is further invested in both debt and equity and, in some cases, even offers you the option to make this switch between the two options by managing your portfolio for higher returns.
Term plans are a type of life insurance policies that give you coverage for a specified term of years. In case of unfortunate passing away of the insured during the term period specified in the policy, a death benefit is paid.
Besides, there are a multiple number of other things you need to consider during the course of your insurance journey. Things like riders, changing market dynamics, performance of ULIPs, etc. You need to invest a bit of your time and energies towards understanding the various benefits you can accrue by being aware and choosing right. A very good and an efficient way to do that is to audit all your insurance policies on a regular basis.
Experts suggest that it’s important to take a fresh look at the performance of your policies every five years to maximise your gains both in terms of insurance and investment parameters. It helps you in the following ways:
The right channelisation of funds: Basis your earning capacity and your age, you can increase the safety net for you and your family. This helps you not just add value to your insurance portfolio but also enables you to realign basis your priorities and responsibilities according to the stage of life you’re at.
Benefit from new-age offerings: Please understand that the market is evolving rapidly to keep pace with the changing facets of life. The various insurance companies regularly bring out new offerings and tweak the old ones to make the policies more attractive and meaningful for the buyers. Regular auditing enables you to bring in new age offerings that come into the market into your portfolio, and also enables you to realign your insurance goals according to the stage of life you’re at..
Leverage the new-generation plans: In many places, the plans you’ve taken might have brought in options to get add-ons or include new riders. Auditing gives you the option to upgrade your existing plan to get more value at a fraction of the cost.
So, ensure that you audit your policies regularly to derive maximum benefits for you and your family. If you feel you’re caught up in your personal and professional commitments, it would be prudent to take help from a professional to make an analysis of all life insurance policies of your family and get the right understanding. When are you starting?