In life, not only routine income and expenses that must be evaluated
regularly and periodically, insurance policies must also be evaluated. So
that the need for protection in our lives is maximized.
In fact, there are no standard rules around the evaluation of insurance
policies. However, without an evaluation process, it is likely that the
benefits we receive will not match our needs.
Quoting a statement from a source in a Youtube video broadcast on Metro
Manulife TV, it is stated that there are several factors that make it
mandatory to evaluate our insurance policy regardless of the type of
insurance owned. Here's the explanation:
1. Do a Policy Evaluation According to Our Financial Condition
Evaluate your insurance policy on a regular basis so that your financial
protection needs can be met optimally.
One example is if we regularly get an increase in income every year.
Usually, an increase in salary is accompanied by an increase in spending,
because usually an increase in income is accompanied by a change in
lifestyle.
Ideally, the higher a person's cost of living, the higher the life insurance
coverage he has. Especially for the breadwinner, must be diligent in
evaluating his insurance policy.
Why is that?
Because, life insurance coverage serves to bear the financial risks that
occur if the breadwinner is no longer "able" to work. This could be because
the breadwinner dies, or suffers a total permanent disability.
The ideal amount of Sum Insured (UP) should be able to cover the annual
expenses of the family left behind and adjusted for the calculation of
inflation.
The Sum Insured (UP) of USD 1 billion for now may seem big. However, USD 1
billion in the next 20 years will look mediocre or even inadequate, if
annual inflation reaches 5%.
The same thing must be done for someone who has lost or experienced a
reduction in income.
The Covid-19 pandemic has not only made many companies reduce the salaries
of their employees in order to cut operational costs, but also terminated
employment. This policy is certainly a pressure in the finances of many
people.
Premium payments, which are generally made annually or monthly, will feel
very heavy.
Before reducing the benefits of the policy, first do a review of the
potential risks that we have the potential to experience. Recalculate our
monthly expenses, whether the calculation of the lower premium, the
protection benefit is still sufficient.
2. The Number of Our Family and Our Age is Increasing
Increasing family members will of course increase the need for protection.
It could be an event where someone let go of the single period, and
accompanied by the birth of a child.
The more members of our family, the greater the coverage needed. Daily
operational costs certainly increase, and of course it will greatly affect
our routine expenses.
Is the coverage benefit of current insurance still the same? Most likely the
answer is "no."
This is because our new spending standards have the potential to increase in
the long term due to inflation. Do an evaluation of your insurance policy to
find out.
Recalculate your annual expenses by entering the value of the inflation
assumption in the next 10 or 20 years.
Do an evaluation by finding out the Sum Insured (UP) or benefits in your
insurance. Adjust it with the calculation of our expenses later in the
future.
Sum Insured (UP) is the total amount of money paid by the insurer in this
case is the insurance company, when the insured (policy holder) submits a
claim in accordance with the risks guaranteed in the insurance policy.
3. Medical Cost Inflation Beats Annual Inflation
According to the 2020 Global Medical Trend Wurvey Report released by Willis
Tower Watson, inflation of rising medical costs in Asia Pacific countries
reached 7.1% in Asia Pacific.
Meanwhile in Indonesia, the value reached 11%, aka above the average for
Asia Pacific countries. It should be noted that the increase in medical
costs in Indonesia is higher than Singapore, Thailand, the Philippines,
China, South Korea, Taiwan, Hong Kong, New Zealand, and Australia.
Just imagine, without an evaluation of the policy, of course we will not
realize that the benefits of changing hospital rooms, doctor consultation
fees, medicines, and others, are no longer appropriate in the future.
It is very likely that the difference in the value of the claim bill that we
have to pay for the costs above will be greater. If this happens, our
financial health will continue to be disrupted.
4. As We Get Older, and Our Assets Grow
With increasing age, the greater the risk we experience in terms of general
health.
Not only that, the age we cannot avoid, also brings us closer to a time
where we will leave the people we love.
When we are young and productive, it never hurts for us to do a re-medical
check, and do a review of insurance policies, and add the needed protection
benefits.
The more income we increase, the more likely we are to add assets for
personal use. Call it like a vehicle in the form of a motorcycle or a car.
In addition to requiring additional insurance to protect the vehicle, it can
also be accompanied by an increased risk of accidents that we experience.
Does the insurance that we have is accompanied by accident protection
benefits? Do an evaluation if you are not sure.
Add protection for these risks, to protect your finances in the future.
When is the Right Time to Evaluate an Insurance Policy?
As explained above, there are no standard rules regarding when we should
evaluate an insurance policy. However, the informant suggested that this
evaluation be carried out every two or three years.
Do not hesitate to contact your insurance agent to assist you in reviewing
life insurance policies.
It should be noted that without an insurance policy review, the protection
obtained may not be optimal.
The informant also reminded that insurance companies provide flexibility for
policy evaluation. The addition and subtraction of benefits from insurance
can of course be increased or decreased according to our financial
capabilities.
Tags
Finance