Can you be overinsured?

March 27, 2023

When it comes to insurance, the key thing is to have an appropriate level for your needs – not too much, not too little. Too little may leave with protection gaps to bridge, while too much could see you spending more than you need.

So, here are a few signs that – while your level of insurance cover may well have been right in the past – you might now be overinsured.

Your circumstances have changed

Insurance has a big part to play in your financial life, especially when you’re in the “accumulation” phase – you might be having kids, building your wealth, maybe starting a business.

But as you go through life, your circumstances will change. Your kids might leave home, which may reduce the financial obligation you have for them. Or you might have paid down a large chunk of your mortgage.

Whenever these things happen, it’s worth checking that your insurance is still appropriate. You might find that you’re insured for things that you no longer need to cover, and could use the money elsewhere, or save it.

You’ve paid off debt

This is a big one. For a lot of people, income protection insurance or similar mortgage payment protection policies are vital to ensure that they can remain financially afloat if they are unable to work due to illness or injury. Knowing insurance is in place to help you make the repayments on a mortgage, should you need it, provides huge peace of mind.

But if you’ve paid off your mortgage (or at least a large part of it), you may not need so much cover. Carrying less debt may also reduce the amount you need in life insurance. So, if you’ve recently become debt-free, get in touch: now might be a good time to book an insurance check-up.

You have a lot of savings

If you’ve accumulated a significant amount of savings, this may provide enough of a buffer that you do not need so much income protection or cover through other policies. If you think you have enough saved that you could happily support yourself for a while, you may decide you want to extend your wait period before your income protection policy pays out, for example.

Your income has changed

Retirement is a great time to make sure your insurance is still appropriate. If you’re no longer relying on an income from your day job, it may change the type or level of cover that’s appropriate. If you’ve moved to part-time work, you may also find you can make a change.

Time for a check-up?

If you’d like to make sure that your insurance cover is still set at the right level, get in touch with us today. Even if you haven’t had a major life change, it’s still a good idea to check in regularly. We can talk through your needs and how your insurance plan is keeping up with your life.

The information contained in this publication is intended for general guidance and information only. It has not been personally prepared for you. Therefore, you should not act on this information if you have not considered the appropriateness of this information to your personal objectives, financial situation and needs. You should consult with us before making any investment decision. Historical market performance may not be indicative of future market performance.