The beginning of a new year is often a great time for reflection. While many of us set resolutions to exercise more or consume less, it can be valuable to set financial goals too. Important among these is to consider whether your short-term insurance is providing the cover you need. This new year, why not make it a goal to make the most of what you have, by ensuring no emergencies or unforeseen events can impact your financial plan? Short-term insurance is a vital part of this.
Allow yourself time to consider your insurance needs
Making time for yourself to assess your financial portfolio and insurance policies may be putting your needs first, but the benefits extend to any family members and loved ones who would be impacted if you were to face financial difficulty. Just like you’d put your own oxygen mask on first before helping others in an emergency on board an aircraft, it’s good to prioritise your personal admin. Take the time you need to start your year on the right note, and set yourself – and those close to you – up with a secure financial safety net.
First things first: assess what you own
Looking at your contents as a whole is a very important exercise. With the festive season just behind us, there may be a new gadget or piece of jewellery that should now be part of your All Risk cover (cover for items you carry with you outside the home). Perhaps you have an upgraded appliance that means your contents cover needs to increase. If you don’t factor in the replacement cost of anything new, together with what you already own, you won’t have proper protection in place. Also consider that over time, most goods go up in price. You may therefore need to increase your cover on your current goods to reflect realistic replacement values, even if they have aged.
Can you clear the clutter?
On the other hand, you may be using the new year to reassess what you own in an effort to downscale and clear the clutter. In this instance, consider whether you may be over-insuring by including goods you don’t need or want anymore in your cover. Removing a laptop that you gave away from your All Risk cover or realising your home contents are worth less overall (because you were able to sell or donate some items) could mean that you can make adjustments to your policy to enjoy a lower insurance premium. Taking stock of what you own and whether you really need or use it may also hold benefits to support other New Year’s resolutions. Clutter can cause anxiety when items appear missing or are difficult to locate, and knowing you are spending money unnecessarily by insuring items that are no longer valuable to you can cause unwarranted financial stress. While some people can thrive in chaos, being more organised generally has far reaching benefits – both financially and otherwise.
Cutting costs may mean cutting cover
Some people try to practise ‘self-insurance’ by only taking out enough insurance to cover some of their belongings. The idea is that they are then prepared to pay for the rest of their belongings themselves if they need to replace them. In theory, this may sound like a good way to minimise your insurance premium, but it doesn’t work practically. Remember that for your contents cover, your insurer considers all of your contents collectively. So the cover you put in place should be enough for this collective amount, even though you may only claim for some of your contents in a crisis. If you are found to be underinsured overall, any claim will be paid based on the principle of average. For example, if your overall contents are underinsured by 20% and your television is stolen, your insurer will only pay 80% towards you replacement television.
Get the guidance you need
The task of assessing your contents – noting which might need an upgrade upon replacement, which you are likely to do away with, and whether your home contents cover accurately reflects this – can feel daunting. If you need help, it may be worth checking with your insurer whether they offer a valuation service, as several do. Working with your adviser can also help you make sure you’ve considered all angles and get the policy best suited to your needs. Knowing you are fully covered and in a position to withstand financial emergencies can go a long way to ensuring financial peace of mind this 2020.
We wish you a safe and happy year ahead.