Life Insurance: Review and Update Your Policy on a Regular Basis

By on July 9, 2018

Life insurance provides financial security for a family’s future after the death of a loved one. A good life insurance policy will also protect the estate (home, investments, etc.) which is to be allocated to the stipulated beneficiaries.

Sit down with your trusted insurance agent to consider the financial burdens which will be left to your family, such as a mortgage, child care, health care expenses, taxes or college tuition, to determine which type of life insurance to buy and how much coverage you actually need. Once you’ve crafted a comprehensive policy, take time to read your policy thoroughly so you understand the procedures for payments and benefit dispensation.

Many people buy life insurance and never give it a second thought, however, your insurance needs change as your life situation changes. The coverage you initially purchased may not go far enough if your investments are highly successful or your child is going off to college. On the other hand, you may have too much coverage once your home mortgage is paid off during retirement.

It is important to conduct a regular review of your life insurance coverage with your agent to ensure your family is protected from financial hardships.

Review your life insurance with your Insurance Agent to consider the following questions:

  • Have your premiums recently gone up?
  • Do your guaranteed benefits cover your current needs?
  • Does your policy have cash-value surrender option?
  • When and how can you access the contract benefits or cash-value surrender?
  • Should you purchase another form of life insurance?

Any significant life event — such as a having a child, getting married or divorced, buying a home or losing your steady income — should encourage you to review and make changes to your coverage. You could potentially lower your premiums, expend your death benefits or convert from term life insurance policy to a new whole life insurance policy based on your changing needs.

6 Reasons to Review of Life Insurance Coverage

1. Getting Married, Having a Baby or Going Through a Divorces

No matter who you are, marriage, birth and divorce will significantly shift the reality of your finances. Each of these life changes will require you to review your policy’s beneficiaries and what coverage is in place for children and spouses. To protect your new family, you may need to purchase more insurance or change your named beneficiaries.

A divorce or separation may require you to negotiate the ownership or benefit obligations of your life insurance policy. State laws vary, so ask your trusted attorney and insurance agent for advice and information. Review your policy to ensure any children you and your former spouse shared continue to be protected.

2. A Change in Health Condition

A sudden change in health condition can change your eligibility and need for insurance. If you health has declined you may need more insurance or a different mix of insurance, while if your health has improved you may be eligible for a reevaluation of your life insurance premium.

People often fear their insurer will end your life insurance coverage if your health declines, however if you are current with your premium payments, changes to your health will not matter. Instead you should review your policy to determine if it offers any accelerated benefits (such as a cash loan) that you can access in the event of a serious or long-term illness.

And in the event your health has improved — say you quit smoking — you will want to ask your insurer for more information on reducing your policy costs.

3. A Change in Your Financial Situation

For example:

  • Caring for an Aging Parent
  • Coming into an Inheritance
  • Losing your Job
  • Selling Property or Investments, etc.

Losing your job not only cuts into your income, but may also cut your access to life insurance coverage. If you have experienced a change in financial stability, speak with your insurer about crafting a new policy with lower premiums. You may also consider converting from a whole life policy to a cheaper term life insurance policy for extra savings.

In addition, if your spouse was recently employed, either one of you received a raise or you came into an inheritance, this may reduce your need for a high death benefit.

4. When You Start a Business

Many small business lenders require you to purchase a separate life insurance policy when you apply for a loan. Life insurance protects business partners or key executives from debts and operating expenses in the event of the owners death or disability.

5. Having a Taxable Estate

If your income and investments are so successful that they trigger estate taxes, life insurance is one of many ways to lower your tax burden without giving up access to your funds. Permanent life insurance with a cash-value surrender can be expensive but will cut taxes on your estate.

6. Retirement

Leaving the workplace may mean giving up the group life insurance benefits offered by your employer. Typically, retirees do not need their life insurance and rely on retirement savings to provide income. However, if those retirement accounts are not able to keep up with inflation you might actually need more life insurance to cover expenses for your widow.

Review Your Life Insurance Coverage Every 3-5 Years

Life insurance is there to protect your family against future financial burdens. Certain life events are going to trigger a change in finances. Review your life insurance policy every 3 to 5 year to ensure you proper coverage at price your can sustain. And update your policy anytime your life changes dramatically.

Keep in mind that you may not need to cancel your current policy in order to get the coverage or benefits you need. Ask your trusted insurance agent about any options or changes recommended for your current policy.

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About Harold Goldman

I am the founder of FinancialSafetyNet.org, and a Retirement Planning and Long-Term Care specialist. I am also the President of Emes Insurance Services, Inc., a Murrieta based insurance agency designed to help people with Retirement Planning and funding for College. I believe in educating my clients to become financially competent in an effort to develop plans for guaranteed income, protection against loss and tax-advantaged growth. To contact me Call (844)-376-2265

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