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:

Redundant Policies & Overlapping Coverage
Inefficient Portfolio Design
Overpaying Due to Lack of Market Comparison

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 client's 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 client's 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 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, 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 the client is considering is primarily intended for 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 later.

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 your annual income in early-stage critical illness would be sufficient as that would usually be the duration necessary for recovery. If you pass that, chances are that the condition is likely to worsen to a late-stage critical illness.

Furthermore, combining a whole-life policy with a term-life policy, both offering minimal coverage, prevents the client from taking advantage of the economies of scale, unlike having a single policy that covers everything.

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 provide 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 the choice of using either a whole life or term life.

Multiply that by the anticipated payment duration, and the overall lifetime savings can effortlessly amount to $61,607 to $85,591. The additional savings are then allocated to enhance the client's wealth accumulation and address short-term planning needs, such as property and 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 recent graduate bought term insurance on the advice of a friend who had just entered the insurance field. The purpose of acquiring the current term insurance is to ensure 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. Considering the client's goal to cover risks during their working years, I pointed out that paying for a term plan extending until age 80 might be unnecessary, as it is likely the client will achieve financial independence before then.

Additionally, maintaining coverage until age 80 could lead to increased expenses during the client's retirement years, as extra arrangements would be necessary to cover the cost of term insurance post-retirement if the client wishes to remain insured beyond that point.

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 per annum.

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: