Tuesday, June 2, 2015

Common Insurance Mistakes to Avoid (Part Two)

Read Part One here.

4. Be aware of pre-existing health conditions.

If you have to cancel your health insurance, please be cautious about any medical conditions that you have developed while your policy was in force. If you need to transfer providers or get insurance at another time in the future, those medical issues become 'pre-existing conditions'. Having a pre-existing condition, depending on its severity, could mean much higher premiums or in the worst case scenario, it could prohibit you from being covered at all. Make sure you bear this in mind and ask a professional before cancelling your policy or before buying your first insurance. Many people have unfortunately let their policy lapse or cancel it entirely, believing that they will be able to re-acquire the same cover at the same prices at another time if they need to. This may not the case.

Medical Conditions

5. Make honest and full disclosures on your application.

Insurance providers are nothing if not thorough. Lying or omitting information on your application in hopes of getting a better deal on your premiums or thinking that some information is unimportant could have dire consequences. When you have to claim on your policy, the insurance provider can legally deny you your claim if you have found to have misrepresented or omitted information. For instance, if you have a pre-existing medical condition or injury and you fail to provide details on the application forms, the provider could very well not pay out your claim. Similarly, if you check non-smoker on the application and it is later discovered that you smoke, your claim could be reduced or cancelled to make up for the increased premiums you would have been paying if you had made full disclosure. The bottom line is that it is far better to be safe than sorry. Make all necessary disclosures, be truthful and if you're at all unsure about anything, ask a professional adviser for a consultation before proceeding.

Full Disclosure

6. Don't leave it too late.

When we are young, often purchasing insurance is the last thing on our minds. We're young, healthy, full of life and at very low risk of needing our lives, our health or our debts covered. Ironically, the time when we perhaps least need insurance is the time we should be thinking about buying it the most. If we leave it too long, until we are older, we are also going to have more pre-existing conditions and have to pay higher and higher premiums. In my personal experience, I was lucky enough to have a medical policy before I was diagnosed with Crohn's Disease in my early twenties. If I had left it longer, I would have had to pay over $30,000 of medical costs out of my own pocket. Think about getting your life and your health covered before you need it. It will benefit you in the long run.

Aging and Insurance

7. Review your policies regularly.

Spratt Financial reviews our clients' insurance policies on a yearly basis for a very good reason. Things can change, both in your life and in the insurance marketplace. It is likely that you will be in a different financial situation with different needs a year from today, and it is essential that your insurance plan covers those current needs. Basic life cover with a sum assured of $50,000 may work when you're 20 with no dependants, but it won't be enough after your first child comes along or after you and your partner secure a mortgage. Review regularly, and make sure your cover fits your current circumstance.

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