Should you increase your Life Insurance cover in line with Inflation?
Linking your life insurance cover in line with inflation ensures the money your loved ones will receive in the future maintains it’s value and is safeguarded against the silent erosion of purchasing power. It is always important to review your sum insured (the total payout) matches the realities of your current and future cost of living.
How inflation adjustments work
Most insurers apply the inflation increases to your policy at renewal and provide you with a notice of the new sum insured and revised premium. The premium increase is usually very low and relative to the extra amount of cover you receive. You have the option to accept or decline the increase each anniversary if you wish.
When should I accept the increase?
The increase will occur automatically and is recommended in most cases, some other examples are:
- Still paying a mortgage
-
Have dependents reliant on your income
- Want that extra peace of mind.
When you can consider declining the increase
You might consider declining the inflation increase when:
- You are mortgage free or close to paying off your loan
- No dependants
- Have enough cover for your future needs.
The decision is personal. Your needs do change as your life evolves. Just remember declining the inflation increase is simple (usually an email confirming the decline), however increasing down the track could require a new application and health checks, depending on the insurer, unless you qualify under a Special Event Provision (getting married, starting a family, or taking on a mortgage).
If you are considering to arrange or decline inflation adjustments we strongly recommend having a chat with us, we can help you calculate the level of cover that is right for you now, and what will continue to protect your family in the future.