The sum insured is the last number to be worked out. Before it comes the list of what is actually exposed, and for an established household that list runs well past the mortgage.
An income, while it is still being earned. A business that has become dependent on one person. A spouse with thirty years of their own to fund. Children whose inheritance is a farm or a firm that does not divide neatly. Assets that would have to be sold at whatever the market happened to be offering that month.
Set the cover against that list, and the arithmetic looks after itself.
The contract is the product
Two trauma policies can both name cancer and mean different things by it: one pays at a defined severity, another earlier. One income protection benefit begins after a set period of total disability; another recognises partial disability, which decides whether someone working three days a week through treatment is supported while they do it.
The wording is where those outcomes are settled, so the wording is what gets read. The insurers worth recommending are the ones whose benefit definitions look as though the claim was being imagined while they were written.
Underwriting happens once
Medical history is assessed at application and, in effect, never again. Whatever is disclosed and accepted then is held for the life of the contract.
That makes terms secured early an asset in their own right, and it makes the application the most valuable hour in the whole process. Disclosure done thoroughly at the outset is what allows a claim, years later, to be a matter of administration rather than argument.
What the annual review is for
Cover is reviewed once a year for every client, and again whenever something changes the list: a birth, a sale, a new debt, a change in income.
Take the case that comes up most often. Cover was arranged against a $2 million mortgage. The mortgage is now $100,000.
Where the loan was the only exposure, the cover reduces by the difference and the matter is closed. More often the exposure has moved rather than gone. The debt has been replaced by a company that would struggle for a period without its founder, or by an estate that cannot be divided evenly while the asset producing the income stays intact. The mortgage was the version of the risk that was easiest to measure. By year ten it is seldom the largest one.
So the cover comes down against the loan and is rebuilt around what has taken its place. Sometimes the total falls considerably. Sometimes it rises. Either way it is pointed at the present.
What it costs
Premiums rise with age. What a yearly review adds is the assurance that age is the only thing raising them, since cover re-sized as circumstances change offsets part of that rise, and in some years all of it.
Affordability is a constraint, and it is respected from the first meeting; a package that cannot be sustained will not be recommended. It is a constraint on the answer rather than the method for finding it. Cover is chosen for what it has to do, and then made to fit.
The practical point
Get the list right at the outset. Choose a contract whose wording still means what it appeared to mean on the day it is needed. Secure terms while health allows. Then keep the cover pointed at what is being protected now rather than what was being protected then.
The first three happen once. The fourth happens every year.
Arrange a time to talk. We meet in person, in Hamilton or wherever suits you.