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Increasing Insurance Cover

How can I easily increase my insurance cover?

If your insurance policy is guaranteed renewable you are covered regardless of future changes to your health, occupation or pastimes. But what if you realise that you don’t have enough cover and you need to increase your insurance cover?

An increase in your cover means the insurer is taking on more risk so they will ask you to update your details. This may involve completing a form similar to the one used at your initial application detailing your occupation, pastime and health history which is then assessed or “underwritten” by the insurer. If your health has deteriorated, or you have taken up a risky occupation or pastime, you may find that insurer refuses the increase in cover or offers it to you with an exclusion or loading.

Guaranteed Future Insurability

However there is an easier way. Many Life, TPD and Trauma policies include a benefit called Guaranteed Future Insurability (or Cover Increase for Nominated events) which allows you to increase your cover without updating all your details and being underwritten.

Insurance companies recognise that if your circumstances change so will your insurance needs. For example a single person will have different needs to married person or a couple with children.

Guaranteed Future Insurability applies to a number of life events. These include marriage, divorce, birth or adoption of a child, taking out or increasing a mortgage, an increase in salary or the death of a spouse. Some insurers will even allow an increase every three years period without an event occurring. The increase amount allowed is usually limited to 25% of your current cover with a maximum of $200,000 and the increase must usually be applied for shortly after the event or at renewal time.

Increasing Income Benefit

Similarly your Income Protection policy may have an Increasing Income benefit. This allows your monthly benefit to be increased without underwriting by up to 10% or 15% each year as your income increases. Income evidence will need to be provided and usually this increase is only available around annual renewal time.

Automatic CPI Indexation

Another way of increasing your cover is through automatic CPI indexation. This is free option offered by most policies. Every year at renewal the insurer will offer you an increase to your cover equal to the change in the CPI (Consumer Price Index), usually with a minimum of 3% to 5%. This increase is entirely optional – you can notify the insurer if you do not wish to take this up each year at renewal time.

Summary

If you have developed a medical condition which makes it difficult to increase your cover through normal underwriting then accessing more cover through the Guaranteed Future Insurability benefit, Increasing Income Benefit or automatic CPI indexation may be invaluable. Another benefit is that you avoid the extra paperwork which would otherwise be associated with increasing cover. When you are comparing policies using Compare Quotes you can check if these benefits are included.



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