Should I reduce my insurance premiums now or later?

Hi anon,

Have you considered converting the payment mode to monthly payment in order to ease your cash flow crunch? This may be a way to temporarily reduce financial stress.

The other way out is to apply for premium deferment in view of COVID 19. Most insurers would have the option to do so.

Lastly, if the plan has cash value, you may apply for a policy loan.

Most importantly, don't drop any polices if it reduces coverage, unless you are over insured. If anything were to happen now, your coverage is what prevents you from becoming even poorer. If there is an opportunity to save premiums without sacrificing coverage, then you can do something.

After COVID 19 passes, you may want to relook your finances so that you ensure an adequate emergency fund for your current age and circumstances. This is to ensure that even in a situation where you are out of a job for a period of time, meeting your obligations such as expenses, mortgage and insurance will not be affetced.​​​

Above all, having the right insurance policies (and thereby right insurance coverage) is more important than dropping and acquiring insurance policies during each crisis.

The reason is simple. Let's assume that you drop your essential coverage and managed to save some premium now. Since it is essential coverage, you will get the same coverage again after the current crisis is over. Generally, you will be forced to pay a higher premium then. This is because the premium usually increases with age. In the end, you are probably not any better off.

Now, here is what I will suggest for you to do instead:

Insurance Portfolio Summary

Firstly, one of the most important things to do is to have a complete understanding of your existing insurance portfolio. Through this process, it allows us to understand the coverage that we have, any financial gap, as well as to find out whether we are overpaying for our insurance policies.

Key Reasons Why:

Why Every Client needs an Insurance Policy Summary

Next, we need to conduct comprehensive financial planning for the future. Through this process, it helps us to determine whether you are holding onto the right insurance policies, or whether there is a need to optimise part (or whole) of this portfolio.

Cash Flow

Thereafter, we need to have a complete understanding on our cashflow. Through this process, we will understand our earning ability and spending habit.

Here is a Guide:

Understanding Your Personal Cash Flow

After this is completed, brainstorm on how you can improve your cash flow, e.g. increase income, reduce expenditure.

How much insurance coverage should You have?

As a general rule,

10% to 20% of your annual income on healthcare insurance and life insurance

Basic Life Cover = 10 times your annual income

Critical Illness Coverage = 5 times your annual income

On the whole, I believe what you need is to conduct a comprehensive review together with your agent. This will help you to evalaute your current situation and to make an informed decision for your insurance needs.

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