4 Factors Why We Must Evaluate Insurance Policies

Queenews.com- In life, it’s not just 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 evaluating insurance policies. However, without an evaluation process, it is likely that the benefits we receive are not in accordance with our needs.

Quoting the statement of the source in the 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

Carry out periodic evaluations of insurance policies so that financial protection needs can be optimally met.

One example is if we routinely get an increase in income every year. Usually, a salary increase is accompanied by an increase in expenses, because usually an increase in income is accompanied by a higher change in lifestyle.

Ideally, the higher a person’s cost of living, the higher the coverage from life insurance they have. Especially for the breadwinner, must diligently evaluate the insurance policy.

Why is that?

Because, life insurance coverage serves to cover the financial risks that occur if the breadwinner is no longer “able” to work. This can be caused by the death of the breadwinner, or suffers from total permanent disability.

The ideal Sum Insured (UP) should be able to cover the annual expenses of the family left behind and adjusted for inflation calculations.

The Sum Assured (UP) of IDR 1 billion at this time may seem large. However, IDR 1 billion in 20 years to come 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 their employees’ salaries in order to cut operational costs, but also terminated employment (PHK). This policy certainly puts pressure on many people’s finances.

Premium payments, which are generally made annually or monthly, will be 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, is the cheaper premium calculation for protection benefits still sufficient?

2.The Number of Our Families and Age Increases

The addition of family members will of course increase the need for protection. It can be in the form of an event where a person releases his bachelor period, and is accompanied by the birth of a child.

The more members of our family, the greater the coverage needed. Daily operational costs will certainly increase, and of course this will greatly affect our routine expenses.

Is the coverage benefit from the current insurance still the same? Most likely the answer is “no.”

This is because our new spending standard has the potential to increase in the long run due to inflation. Do an evaluation of your insurance policy to find out.

Recalculate your annual expenses by including the assumed value of inflation in the next 10 or 20 years.

Do an evaluation by finding out the sum insured (UP) or benefits in your insurance. Adjust the calculation of our expenses later in the future.

Sum Assured (UP) is the total amount of money paid by the insurer, in this case the insurance company, when the insured (policy holder) submits a claim according to the risk guaranteed in the insurance policy.

3.Medical Cost Inflation Beats Annual Inflation in Indonesia

According to the 2020 Global Medical Trend Wurvey Report released by Willis Tower Watson, inflation has increased medical costs in Asia Pacific countries to reach 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 in Singapore, Thailand, the Philippines, China, South Korea, Taiwan, Hong Kong, New Zealand and Australia.

Just imagine, without a policy evaluation, of course we will not realize that the benefits of changing hospital rooms, doctor’s consultation fees, medicines, and others, are no longer appropriate in the future.

Most likely, the difference in the value of claims 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 Age Increases, and Our Assets Experiencing Growth

With increasing age, the greater the risks we experience in terms of health in general.

Not only that, increasing age which we cannot avoid, also brings us closer to the time when we will leave the people we love.

When we are young and productive, there is nothing wrong with us having a repeat medical examination, and reviewing insurance policies, as well as adding the needed protection benefits.

The more income we have, the more likely we are to add assets for personal use. Call it like a vehicle in the form of a motorbike or a car.

Apart from requiring additional insurance to protect the vehicle, this can also be accompanied by an increased risk of accidents that we experience.

Does the insurance we have come with accident protection benefits? Do an evaluation if you are not sure.

Add protection for these risks, in order 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 have to evaluate insurance policies. However, sources suggested that this evaluation be carried out every two or three years.

Don’t 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 source also reminded that insurance companies provide flexibility for policy evaluation. The addition and reduction of benefits from insurance can of course be added or reduced according to our financial capabilities.

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