Overinsured & Overpaying: How An Insurance Audit Transformed These Portfolios
Insurance is meant to provide financial security, yet many individuals unknowingly overpay for redundant, inefficient, or simply overpriced policies. Over the years, it’s easy to accumulate multiple policies, some of which may no longer serve their intended purpose or may overlap unnecessarily.
This is where an insurance audit comes in. By taking a structured approach to evaluating insurance portfolios, I help clients eliminate redundancies, optimize policy structures, and reduce costs without compromising coverage.
Below are three real-life case studies illustrating how an insurance audit helped clients cut costs and improve efficiency—ensuring they are adequately protected without overspending:
Case Study 1: Redundant Policies & Overlapping Coverage
The Problem:
A common problem that many clients face comes from the accumulation of multiple insurance policies over time as their life stage changes - often from different agents, providers, or promotions — without reviewing how they fit into their overall financial plan.
As a result, they unknowingly pay for redundant policies that no longer align with their current life stage or coverage needs. Additionally, layering new policies on top of old ones often leads to overlapping benefits, causing clients to overpay for coverage they don’t need.
Profile of client:
40+ Years old, married with 2 kids and planning for retirement that is due in the next 5 to 10 years once their mortgage is cleared, given that provisions for their children have already been set aside.
The Audit & Solution:
Having set aside sufficient resources for the client’s dependents, the main motivation for having coverage is for personal income replacement during the clients working years and liability protection for the remaining outstanding mortgage.
With a total coverage of nearly 3 million in death and disability and 2 million in critical illness, the client is overinsured from a necessity standpoint. By examining the breakdown of the portfolio, we can identify two areas for potential improvements.
The first area is the overlap in personal accident coverage which, in my professional opinion, is not necessary given that the client is also covered for personal accident from the existing corporate insurance.
As such, should the client wish to be covered for personal accident coverage and medical reimbursement, the suggestion was to retain the policy that provides higher coverage and terminate the overlapping policy.
The second area lies in terms of the source of critical illness coverage.
For the cells highlighted in blue, the issue identified concerns the premium behaviour of the critical illness coverage coming from the Mindef Group Insurance, which is set to increase with age.
As such, given that the client is already overinsured, it would make sense for the client to reconsider the existing coverage coming from the Mindef Group Insurance and avoid paying higher premiums as the client ages.
In addition to that, I have also highlighted to the client the potential coverage redundancy that may arise in the near future once he has achieved financial independence, which was highlighted in yellow.
The Outcome:
By adopting the recommendations and having a leaner and more efficient insurance portfolio, the client now enjoys cost savings (around $2,000/yr) without compromising on necessary protection. The freed-up cash flow was redirected toward investments, strengthening their overall financial security and retirement progress.
Case Study 2: Inefficient Portfolio Design
The Problem:
Some clients don’t just overpay due to redundancy — they also suffer from poor portfolio design.
A frequent error people make is buying various types of policies from multiple insurers without consideration. This leads to inefficiencies and higher premiums than if they chose consolidated, more cost-effective options.
As a result, while the total coverage may be sufficient, the portfolio design itself may be inefficient, resulting in a situation where the client overpays.
Profile of client:
25+ Years old, attached and planning to settle down soon. The coverage that the client is considering is mainly for the provision of income replacement.
The Audit & Solution:
In the case of the client’s existing portfolio, we’ve identified two issues.
The first deals with the sufficiency of coverage. Given the client’s annual income and career trajectory, the existing coverage of $350,000 may not be sufficient which may result in the need for future purchases. This may result in a higher cost of insurance should the client choose to address the gap at a later date.
The second deals with the inefficiency of portfolio design. On the topic of coverage breakdown, having the entirety of the critical illness coverage in the form of early-stage critical illness is, in my professional opinion, a bit of overkill.
From an angle of necessity, having coverage of around 1 to 2 times of your annual income in early-stage critical illness would be deemed to be sufficient as that would usually be the duration necessary to recover or chances are that the condition is heading in the direction of worsening to late-stage critical illness.
In addition, the combination of a whole-life and term-life, each with minimal coverage, results in the inability of the client to reap the benefits of the economics of scale as opposed to having a single policy that provides the entirety of the coverage.
The results of this inefficient portfolio design can be seen in the yearly premium that the client is currently paying compared to the other options presented – term life or whole life – which provides a much higher coverage at a lower yearly premium.
The Outcome:
By optimizing their insurance portfolio design, the client can receive sufficient coverage while lowering their annual premium by $1,104 or $3,369, depending on their selection between the use of whole life or term life.
Multiply that by the duration of payment expected and the total lifetime cost saving can easily reach $61,607 to $85,591. The excess savings are then redirected toward the client’s wealth accumulation and short-term planning needs. (i.e. property & marriage financing)
The above case study shows the significance of having an efficient portfolio design and the cost associated with poor insurance planning.
Case Study 3: Overpaying Due to Lack of Market Comparison
The Problem:
Many clients buy insurance policies from a trusted agent or friend without shopping around for better rates or comparing policies across providers. This lack of due diligence often leads to significantly higher premiums for coverage that could be obtained at a lower cost.
Profile of client:
A fresh graduate who purchased term insurance at the recommendation of his friend who recently joined the insurance industry. The intention of purchasing the term insurance is for the provision of income replacement during the client’s working years.
The Audit & Solution:
In the case of the client’s existing term insurance, we’ve identified two issues.
The first is the duration of coverage. Given the client’s intention to ensure that the risk during the client’s working years is covered, I’ve highlighted to him the potential redundancy of paying for a term plan that covers till 80 years old as it is unlikely that the client is unable to achieve financial independence before that.
Furthermore, having coverage that lasts until the age of 80 may also result in a cost drag during the client’s retirement years as additional provisions need to be made to cover the cost of the term insurance post-retirement should the client want to be insured beyond that.
As such, depending on the client’s intention, the existing duration of coverage might be unnecessary from a needs standpoint and the client would have to reassess whether the client wants to finance for it.
The second is the efficiency of coverage. By applying the same coverage setting, we’ve managed to identify other market providers that essentially provide the same coverage at a lower cost. From the audit itself, we managed to uncover providers in the market that provide the same level of coverage for a longer duration and at a lower cost.
The Outcome:
Should the client wish to make provisions for legacy planning purposes, the client would be able to receive a longer duration of coverage (till 85 years old) at a lower cost. This further reduces the risk of outliving the policy coverage, given that the current life expectancy is around 83 years old.
Should the client wish to make provisions only for the working years, by considering other providers and reducing the duration of coverage, the client would be able to reduce the cost further by $386.
This demonstrates the importance of doing your due diligence before purchasing as well as the need to review your policies regularly before renewing.
Conclusion: Take Control of Your Insurance Portfolio
If you haven’t reviewed your insurance policies in years, there’s a good chance you’re overpaying or carrying redundant coverage.
As a Certified Financial Planner and Licensed Financial Advisor, I provide a fee-based insurance audit and financial advisory service that can help you cut costs, optimize your portfolio, and ensure you’re getting the best value for your money.
You can schedule an introductory meeting to determine if my services are suitable for you here:
Daniel is a Licensed Independent Financial Consultant with MAS and a Certified Financial Planner (CFP®).
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Disclaimer:
This article is meant to be the opinion of the author
This article is for information purposes only
This article should not be seen as financial advice
This advertisement has not been reviewed by the Monetary Authority of Singapore
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