Five reasons why a regular financial protection review is essential

young couple reviewing their financial consultation

Regularly reviewing and updating your financial protection plan is important to ensure that it remains aligned with changing financial circumstances, goals, and market conditions. 

Good financial planning is an essential aspect of achieving long-term financial goals. It involves developing a comprehensive strategy that considers all financial aspects, including investments, savings, protection, and retirement planning.

Having a sound financial plan can provide a sense of security, reduce financial stress, and help individuals make informed financial decisions. However, creating a financial plan is only half the battle.

Regularly reviewing and updating the plan is equally important to ensure that it remains aligned with changing financial circumstances, goals, and market conditions. By regularly reviewing the plan, individuals can make any necessary adjustments to ensure that their financial plan continues to provide the desired outcomes. In this way, financial planning and reviewing can help individuals achieve their financial goals, prepare for unexpected events, and attain financial security.

Yet, every long-term financial plan relies on your client’s ability to earn an income during their working lives. To build a future income for their retirement, your client will need to save, and to be able to save, they need an income. When a client has dependants, loss of their current income will also heavily impact their financial future.

Here are five reasons why regularly reviewing your client’s protection needs is equally important as reviewing their investment and pension plan.

  1. Life events: Life is dynamic, and circumstances can change over time. Protection needs may vary as individuals experience milestones such as marriage, having children, or buying a home. Regular reviews help brokers assess if the existing protection plan adequately covers these new circumstances. Benefits such as guaranteed insurability options and protection continuation options can help your client adjust their cover in line with the increased protection need that arise from certain life events. Adjustments can be made to ensure the client’s loved ones are protected.
  2. Professional events: Clients may change their occupation or become self-employed. These events will inevitably impact their exposure to financial risk. Additionally, their income levels may change due to career advancements, job changes, or business developments. Regular reviews help brokers assess if the client’s current protection plan provides adequate income protection in the event of disability or loss of income.
  3. Policy updates and enhancements: Insurance policies may undergo updates and enhancements over time. Regular reviews provide an opportunity for brokers to inform clients about any policy changes, new coverage options, or improvements in insurance products that may better meet their protection needs.
  4. Financial education: Regular reviews provide an opportunity for brokers to educate their clients about the importance of protecting their financial plan. This helps clients stay informed and actively participate in their financial planning process.
  5. Financial peace of mind: Regularly reviewing protection needs gives clients peace of mind, knowing that their financial well-being is being regularly assessed and protected. It helps ensure that they have the right level of coverage to mitigate financial risks and protect their loved ones.

In summary, reviewing protection needs on a regular basis allows brokers to ensure that the client’s coverage aligns with their changing circumstances, evolving risks, and provides adequate financial protection. It helps clients stay prepared for unexpected events and provides them with the reassurance that their financial resilience is being actively managed.

A case study – meet John and Sarah*.

A few years ago, they were a young couple buying their first home. They decided to take out a mortgage protection policy with serious illness cover to ensure that if anything happened to either of them, the other would not be left struggling with mortgage repayments. At that time, their main concern was their new home, and mortgage protection seemed like the most sensible choice.

Fast forward to the present day, John and Sarah are parents to two young children. Sarah recently received a promotion at work, leading to a significant increase in her income. These changes in their circumstances have increased their financial responsibilities – they now have their children’s future to consider, and their lifestyle has improved with Sarah’s increased income.

If John or Sarah were to pass away unexpectedly or become critically ill, the mortgage cover they initially took out would cover the remaining mortgage repayments, but what about the other expenses?

Their current lifestyle, the cost of raising their children, and potential future education fees would not be covered by the mortgage protection alone.  John and Sarah need to ensure that they remain financially resilient when unforeseen life events occur.

First, they need to protect their future income. They need to review whether their income is sufficiently protected if they are unable to work due to injury or illness. An Income Protection policy will ensure that John and Sarah can still pay off their mortgage if they lose their ability to work.

They may also consider taking additional life cover or serious illness cover. By reviewing their insurance cover, John and Sarah can adapt their insurance policies to their changing needs, ensuring that they continue to provide the best possible protection for their family.

*John and Sarah are fictional characters. Any similarity to actual persons, living or dead, or actual events, is purely coincidental.

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