Question

My financial advisor rebrokes my life cover every two years. A friend of mine says that this does not seem right and that he’s probably doing something dodgy.  Should I be worried?

Answer

The fact that your financial advisor rebrokes your cover every two years does ring an alarm bell.  Two years is the typical cycle over which any commission on life insurance is paid so there is a possibility that your advisor is motivated by more than getting you the best possible deal.

Having said that, I believe that it is important to regularly look at all of your financial arrangements to ensure that any cover that you have is still needed.  When you do an annual review of your finances, you should check to see:

• if you have too much or too little life cover
• whether your disability cover is still needed
• whether your medical aid option is still the most appropriate one for you and your family
• whether your short-term insurance covers all of your assets

Once we have the cover amounts correctly evaluated, it does make sense to check that you’re not paying more than you should for the cover.

For your short-term and medical aid cover, this is fairly straightforward and as long as you keep your eye on any excesses and exclusions, making the correct call should not be that difficult.

When it comes to life insurance and disability cover, if you are healthier than others of your age and are prepared to go through the schlep of having medicals, you may be able to get cover at a lower rate.  As long as you are getting the same or better set of benefits, this does make sense.

However, you must be careful as an unscrupulous insurance salesperson could sell you a weaker set of benefits under the pretext of getting you a better deal.

If you are thinking of replacing your insurance, you must check the following:

• Are any restrictions being placed on the cover you are getting? As we get older, we often pick up medical conditions and these may lead to an exclusion of cover for specific conditions. A new insurance contract may exclude anything related to such a condition.
• Is the term of the policy still the same? I have seen situations where a salesperson has sold someone a policy that expires at a particular age instead of offering cover for the whole of life.  The shorter-term policy would be cheaper.
• Does the new policy have the same premium pattern as the old one had? Again, one can reduce the premium you pay if we have premium increases based on your age rather than a fixed percentage. These age rated premium increases really show themselves when you hit your mid 50s and you find your premiums double every five years.

So, to answer your question, while there may be a measure of self interest on the part of your financial planner,  it does make sense to review all of your financial arrangements regularly.  As long as you are not being put into a weaker set of products, it can be to your advantage to change providers to get a lower premium.