When was the last time you reviewed your life insurance policy, specifically the people who’ll benefit from a pay-out? It’s common to find that customers have not updated their policies, which could mean the wrong people receive a payout when the time comes.
In a survey of 2,000 people, Phoenix Insurance found that 62% had not reviewed the recipients of their life insurance cover since it was set it up. Figures were similar for other financial products too, with 60% failing to update critical illness cover, 65% neglecting to update their personal pension, 61% their income protection and 65% failing to review redundancy cover.
Is not reviewing your life insurance a problem?
If your personal circumstances have changed since taking out the policy, such as relationship status, there could be significant problems in the future. For example, if the policyholder has divorced, separated or remarried, the life insurance may pay-out to the ex-partner rather than the existing spouse. Ultimately, this could lead to significant financial stress for a current spouse or partner.
And when you consider that the statistics for failing to review other financial policies, it is an issue that doesn’t just affect life insurance.
What is the underlying issue?
The problem stems from a perceived lack of awareness among policyholders about reviewing and updating details as their circumstances change. The survey shows that just over half of people didn’t know that their pension would go to the beneficiaries named on the pension scheme, rather than to the main beneficiary of their will.
As well as lack of awareness, not everyone has a high level of engagement around financial planning, even with close family. Three-quarters of those who responded to the survey said they were unaware of the arrangements their parents had in place or their siblings.
How to review life insurance policies
Along with other insurance policies, reviewing policies and recipients is important and something that should be done when there are significant life changes.
There are two ways of tackling the problem. The first is to let someone know that they are the beneficiary of a certain policy so that when the times comes, they know to make a claim.
Keeping the paperwork in order (and accessible) is important too, something that insurers claim many policyholders fail to do. The number of policies and documents can mean things are ‘filed away’, never to see the light of day again. And with many insurers also switching to electronic documents, finding documents and policies can be hard to do.
Expert financial advice on life insurance and more
This isn’t the first survey that points out the problems with out-of-date paperwork. @unbiasedUK highlighted findings from a 2018 survey by Royal London that estimates three-quarters of a million people have a former partner listed as a beneficiary on personal pension, life insurance policies and more.
When your circumstances change, reviewing and updating insurance and other financial policies is essential. For expert advice on life insurances and help with reviewing and updating policies, contact our team today.
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Written by: Cambridge Web Marketing